India’s services sector growth accelerates to 5-month high in August, Reuters PMI shows

By Shaloo Shrivastava

BENGALURU (Reuters) – Activity in India’s dominant services sector grew at its fastest pace in five months in August as demand remained resilient amid easing inflationary pressures, a survey showed.

The final HSBC India Services Purchasing Managers Index compiled by S&P Global rose to 60.9 in August, up from 60.3 in July and beating a preliminary estimate of 60.4.

The reading, which crossed the 50 mark that separates growth from contraction since August 2021, was above its long-term average and marked its highest level since March.

“This growth was largely fueled by an increase in new orders, particularly domestic orders,” said Pranjul Bhandari, HSBC’s chief economist for India.

The new business subindex rose slightly from July to a four-month high and was above its historical average.

International demand was also solid, but the pace of growth slowed sharply from July to a six-month low.

Similarly, although business confidence remained positive in August, it fell to its lowest level in more than a year. Firms were optimistic about the resilience of demand and hoped to see better growth next year.

Services sector hiring continued at a solid pace despite contracting to the weakest level since April.

Cost pressures rose moderately last month due to high food, labor and transportation costs, although growth faced by service providers slowed to a four-year low.

“On a positive note, input costs rose at their slowest pace in six months, with both the manufacturing and services sectors showing the same pattern. Consequently, producer price inflation declined in August,” Bhandari added.

With inflationary pressure easing, firms passed on costs to customers at a much softer pace than in July.

Data last month showed inflation in India fell to a near five-year low of 3.54 percent in July, largely reflecting a high base effect that suggested the slowdown was temporary. Inflation will average 4.2 percent this quarter and 4.6 percent next, a Reuters poll predicted.

A manufacturing PMI released on Monday fell to a three-month low of 57.5 in August, but improving services activity kept the overall PMI unchanged from July’s 60.7.