India’s services activity slows to 58.4 in November

Services activity slows in November

India’s services activity slowed to 58.4 in November compared with 58.5 in the previous month, as total sales rose at a softer pace and prices rose faster owing to building cost pressures.

November marks the second consecutive month of a reading above 58 in the HSBC India Services Business Activity Index.

A reading of over 50 signifies expansion.

"India posted a strong 58.4 services PMI in November 2024, down only a fraction from the prior month’s 58.5," said Pranjul Bhandari, chief India economist, HSBC.

Despite the hiccup, employment rose at the fastest pace in nearly 12 years. However, the concern for 400 service sector firms was rising prices.

"Amid reports of higher food and labour costs, service companies in India observed another upturn in business expenses midway through the third fiscal quarter. The rate of inflation was sharp, the strongest in 15 months and above its long-run average," HSBC report pointed out.

This led to charge inflation rising at its fastest pace in close to 12 years as well. Companies passing on costs does indicate pricing power among service sector firms and also an improvement in demand conditions.

This was also reflected in year ahead outlook, as business confidence was at its highest level since May. The service companies expect marketing efforts to bear fruit.

The performance of the services sector was unlike manufacturing, which shrunk to a joint 11-month low in November.

"The HSBC India Composite Output Index posted 58.6 in November, down only marginally from 59.1 in October and therefore indicating a sharp rate of expansion," HSBC noted.

India’s services sector had held steady in the second quarter, despite economic growth dipping to a seven-quarter low of 5.4 percent. The services growth at 7.1 percent was only slightly below the 7.2 percent growth witnessed in the previous quarter.

Experts have pared down their forecasts for the economy, with most expecting India to stay below 7 percent growth