Service activity scales a 5-month high of 60.9 in August

Despite services activity rising the pace of employment slowed down to a four month low in August.

But there was good news on the inflation front as input inflation was weakest since August 2020. Only 4 percent of the firms increased their average selling price compared to July.

"Out of the four sub-sectors tracked by the survey, Consumer Services posted the sharpest increase in input costs during August. Charge inflation was led by Transport, Information
and Communication," the release stated.

The better performance of India’s services sector was also reflected in the GDP data for the first quarter of the fiscal released on August 30.

Even though the GDP growth eased to 6.7 percent from 7.8 percent in the last quarter, services growth had hit a four-quarter high of 7.3 percent, rising from 6.7 percent in Q4FY24.

The strong service's performance is also reflected in India’s services exports which rose 9.9 percent in the first four months of the fiscal from a similar period last year.

The performance of the services industry contrasted with that of the manufacturing sector, which showed a decline in activity to 57.5 in August compared with 58.1 in the previous month.

However, manufacturing activity remained above the long-run average of 54, despite the decline.

"The Composite PMI for India continued to show strong growth in August, driven by accelerated business activity in the service sector," said Pranjul Bhandari, chief India economist, HSBC.

The decline in manufacturing activity was due to intense competition, which also dented outlook.

"The outlook for the Indian private sector over the next year has moderated, reaching its lowest level in 15 months due to competitive pressure, although the Future Output Index remained above the long-term average," Bhandari noted.