Services sector buoyant in November, overseas orders rise first time since COVID-19 onset 

But stiff cost pressures compel firms to hike prices at the fastest pace since July 2017, the S&P Global India Services PMI indicated  

Updated - December 05, 2022 01:26 pm IST

Published - December 05, 2022 10:59 am IST - New Delhi

Photo used for representational purpose only.

Photo used for representational purpose only. | Photo Credit: The Hindu Businessline

India’s services sector continued to rebound in November, recording the fastest output growth in three months, with new orders accruing at the highest pace since August, as per the S&P Global India Services Purchase Managers’ Index (PMI) which rose to 56.4 from 55.1 in October. A reading of 50 on the PMI indicates no change in business activity levels.    

However, input costs’ burden on service providers remained buoyant, rising at the second-fastest rate since July 2022, which compelled them to raise charges to consumers at the steepest rate in 64 months or little under five-and-a-half years. 

This is the 21st consecutive month that Services firms have raised charges on account of higher costs. In addition to greater transportation costs, firms mentioned higher prices for energy, food, packaging, paper, plastic and electrical products. 

Significantly, new business from overseas clocked its first uptick this November since the onset of COVID-19 in early 2020, even though overall rate of expansion in new orders for Services firms was mild. 

The sustained expansion in new orders and demand buoyancy, along with sharp improvements in business confidence levels, bolstered job creation in the service economy, with new employment rising at a ‘solid pace that was among the quickest in over three years’. 

“Service providers were at their most upbeat towards the year-ahead outlook for output in just under eight years. Firms largely expect demand strength to be maintained in 2023, with some planning to lift marketing budgets to aid sales,” S&P Global said in a note on the survey-based PMI. 

“Indian service providers continued to reap the benefits of strong domestic demand, with PMI data showing faster increases in new business and output. Moreover, expectations of demand buoyancy in the medium-term promoted further job creation,” noted Pollyanna De Lima, economics associate director at S&P Global Market Intelligence. 

While the trend for inflation is somewhat concerning, Ms. De Lima said that strong demand for services again boosted firms’ pricing power, with more companies transferring cost increases to their customers. 

“Evidence of stubborn inflation may prompt further hikes to the policy rate at a time when global economic challenges could negatively impact on India’s growth,” she concluded. 

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