Services activity picks up pace in December on buoyant demand

Services activity picked up pace in December on buoyant demand and brimming business optimism, a private survey showed.

The HSBC India Services Purchasing Managers Index, compiled by S&P Global, rose to a three-month high of 59 in December against 56.9 the previous month.

A PMI reading above 50 indicates expansion, while a reading below that denotes contraction.

“India’s services sector ended the year on a high note, with an uptick in business activity, led by a three-month high new orders index. Input costs rose at a slowerpace than in November, continuing the softening trend which began in mid-2023. But output prices rose at a faster pace, indicating improved corporate margins in December,” Pranjul Bhandari, chief India economist at HSBC, said.

On a quarterly basis, however, weak services activity in October and November dragged down the average to the lowest since the January-March quarter of fiscal 2023.

Favorable economic conditions and positive demand trends propped up growth during the month as new business intakes rose at the fastest clip in three months.

The increase in new business was backed by continued growth of global sales, especially on higher demand from clients in Australia, Canada, Europe, the Middle East and South America.

Having eased since November, however, the rate of expansion in new export orders was modest and the softest since June.

Services firms expect the strong demand momentum to continue into the new year which, coupled with advertising and better customer relationships, underpinned upbeat forecasts for output.

The overall degree of business optimism was strong and better than that seen in November, according to the about 400 panelists who were surveyed.

Higher prices for food and some raw materials drove up average expense in the third quarter, the survey said, adding that the overall rate of inflation was modest, below its long-run average and the weakest in nearly three-and-a-half years.

Overall, India’s private sector activity accelerated in December, reversing the slowdown seen in November.

The HSBC India Composite Purchasing Managers Index Output Index rose from 57.4 to 58.5, signaling a rate of expansion that was the strongest since September.

Goods manufacturers reported a weaker upturn in new orders during the month, while service providers saw acceleration. At the composite level, sales expanded at the fastest rate since September, the survey said.