India’s services activity rises to a 4-month high of 59.3 in December

Services activity data for December

India’s services activity rose to a four-month high of 59.3 in December compared with 58.4 in the previous month, as demand buoyancy helped improved conditions for output growth and new orders, according to results of a private sector survey released on January 6.

"Forward-looking indicators such as new business and future activity suggested that the strong performance will likely continue in the near future," said Ines Lam, Economist at HSBC,

The HSBC India Services Business Activity Index remained above the 58 mark for a third consecutive month. But services activity in the quarter dipped to a four quarter low.

A reading of above 50 signifies expansion.

"Finance & Insurance again registered by far the strongest increases in both new orders and business activity at the sub-sector level," HSBC stated.

The services activity index performance was better than the manufacturing sector, which dipped to a 12-month low of 56.4 in December.

"Strength in the services PMI stands in contrast with the growing signs of a slowdown in the manufacturing industry," Lam said.

India’s economy is expected to perform better in the third quarter compared with the July-September period when growth slumped to a near two-year low of 5.4 percent.

Inflation was also subdued compared with the previous month, but higher fees for inputs did feed into charge inflation, as service providers raised their fees.

There was positive news on the employment front as well.

"The rate of employment growth softened from November, but was sharp
and among the strongest seen since data collection began in December 2005," HSBC noted.

The level of positive sentiment declined from November, but remained above the long-run average.

The government will release preliminary figures for GDP on January 7, indicating the hit to growth owing to a slowdown in growth after the release of the second quarter data.

The economy grew 6 percent in the first half of the year. It would need to log 7 percent growth in the remaining half to achieve the lower end of 6.5-7 percent growth projected by the government.

A tumultuous geopolitical scenario may also weigh on growth. International orders did slip to a three month low in December.