Services sector growth revives in October

Services sector activity in October recovered from a 10-month low in September on robust consumer demand, a private survey showed.

The seasonally adjusted HSBC India Services Business Activity Index rose from 57.7 in September to 58.5 in October. A reading above the 50-mark denotes expansion.

“In October, the services sector saw strong expansions in output and consumer demand, as well as job creation, which rose to a 26-month high,” Pranjul Bhandari, chief India economist at HSBC, said.

“Although input price inflation is accelerating from higher food and wage costs, the general inflation trajectory remains below the long-run average. Business sentiment receded slightly from September, but the future activity index still indicates broadly positive expectations for the year ahead,” he added.

The headline figure was consistent with a sharp and accelerated rate of growth that outpaced its long-run average, the survey said.

Driven by rising sales and optimism about near-term prospects, firms hired additional workers at the highest rate in over two years.

Input costs rose at the strongest pace for three months in October. Higher business expenses were largely attributed to rising wage bills and food costs, it added.

The service economy saw a resurgence in new export sales growth, with survey respondents citing increased demand from clients in regions including Africa, Asia, the Americas, the Middle East, and the UK.

Input price inflation, meanwhile, accelerated to a three-month high in October, with services companies mainly reporting greater food and wage costs.

The overall rate of inflation remained below its long-run average, however. Of all the monitored sub-sectors, cost pressures were the highest in consumer services.

The sectors covered include consumer (excluding retail), transport, information, communication, finance, insurance, real estate and business services.