Services sector activity eases in August amid softer rise in new business orders, supportive policies key to accelerate growth: PMI

New Delhi: The country’s services sector activity growth eased in August as new business inflows rose at a slower pace; following which job creation and output expansion moderated, a monthly survey showed on Wednesday. The IHS Markit India Services Business Activity Index declined from 53.8 in July to 52.4 in August, pointing to a slower rate of increase in output. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction. “The weaker PMI readings for India’s service sector match the trend noted in the manufacturing industry, bringing unwelcome news of a cooling economy halfway through the second quarter of the fiscal year 2019-20,” said Pollyanna de Lima, principal economist at IHS Markit. [caption id=“attachment_4252901” align=“alignleft” width=“380”] Representational image. Reuters.[/caption] The IHS Markit India Composite PMI Output Index, that maps both the manufacturing and services industry, fell from 53.9 in July to 52.6 in August. Notwithstanding the decline, the composite PMI Output Index was in expansion territory for the 18th month in a row. Growth of aggregate new orders moderated from July and was modest. Private sector jobs rose further in August, but the pace of expansion was slower. “Although the two surveys combined point to another round of job gains, a retreat in the rate of employment expansion highlight a wait-and-see approach among businesses who are longing for a meaningful and sustained pick-up in demand growth,” Lima said. Despite the decline, service providers remained confident of a rise in business activity in the coming 12 months, with optimism strengthening to a one-year high. Forecasts of better demand conditions, marketing initiatives and accommodative public policies all boosted sentiment in August, the survey noted. “An important development, however, is evident in a rebound in business sentiment. Both manufacturers and service providers believe that supportive public policies can help shift growth momentum into a higher gear in the coming 12 months,” Lima said. On the inflation front, the survey noted that services companies lifted their selling prices again in August. Meanwhile, India’s GDP growth fell to an over six-year low of 5 percent in the June quarter. Besides, the growth of eight core industries dropped to 2.1 percent in July, mainly due to contraction in coal, crude oil and natural gas production. The IHS Markit India Manufacturing Purchasing Managers’ Index (PMI), released earlier this week, fell to 51.4 in August, its lowest mark since May 2018, from 52.5 in July, as most survey indicators fell since July to signal a widespread loss of momentum.