February Services PMI sees modest expansion

But the rate of expansion was the second slowest since July and was muted by historical standards

But the rate of expansion was the second slowest since July and was muted by historical standards

Services sector activity in India recovered modestly in February on better demand conditions and the slowdown in the coronavirus pandemic, but the rate of expansion was the second-slowest since last July and muted by historical standards, a monthly survey showed.

The seasonally adjusted IHS Markit India Services Business Activity Index reflects a moderate expansion rate, rising to 51.8 in February from 51.5 in January.

“The rebound was attributed by panellists to higher bookings, better demand conditions and the easing of the pandemic. However, the recent surge has been muted by historical standards, with some companies saying growth was dampened by competitive pressures, COVID-19 and higher prices,” IHS Markit said in the survey released Friday.

A Purchasing Managers’ Index (PMI) reading above 50 indicates expansion, while a reading below 50 reflects contraction.

“New business and service activity expanded modestly and at the second-lowest rates since last July. Looking at the anecdotal evidence from survey respondents, inflationary pressures, input shortages and local elections held back growth,” Pollyanna De Lima, economics associate director at IHS Markit, said .

After the pandemic escalated and a related slowdown in growth in January, the services sector picked up a gear in February as COVID-19 cases fell and restrictions were lifted, the company said.

Although new business and output grew faster, they were below their respective long-term averages. “There was also a surge in business confidence, but companies continued to shed jobs. Meanwhile, input costs increased to a lesser extent, as did output prices,” the agency noted.

Ms De Lima noted that growth in the service sector has not rebounded as significantly as many had hoped as COVID-19 cases have fallen significantly since the new wave in January and restrictions have been lifted.

“New business and service activity expanded modestly and at the second-lowest rates since last July. Looking at the anecdotal evidence from survey participants, inflationary pressures, input shortages and local elections held back growth,” Ms. De Lima said.

In addition, it noted that service firms’ business confidence remained subdued compared to its trend, although it had improved since January amid pandemic-related uncertainty and inflationary pressures.

“Although the rate of input cost inflation has moderated from the January high, it remained strong in February. However, fewer companies have passed on additional cost burdens to customers given the subdued demand conditions. Output prices increased only slightly and at the slowest pace in five months,” Ms. De Lima added.

The country’s monthly manufacturing PMI survey released on Wednesday showed that manufacturing activity picked up in February as output and new orders grew at an accelerated pace, helped by favorable demand conditions.

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