Services see marginal decline in November but jobs creation jumps

Services sector activity declined marginally in November but growing sales and new orders helped boost jobs creation, a private survey showed.

The seasonally adjusted HSBC India Services Business Activity Index marginally declined by 10 basis points to 58.4 in November from 58.5 in October.

“During November, services sector employment notably grew at the fastest pace ever recorded since this survey began in 2005. The hiring surge reflected the sector’s improving business confidence, growing new orders, and vigorous international demand,” Pranjul Bhandari, chief India economist at HSBC, said.

“High food and labor costs drove up input and output prices to their fastest rates in 15 months and nearly 12 years respectively,” Bhandari added.

The HSBC PMI survey is based on a single question asking how the level of business activity compares with the situation the month before and conducted by S&P Global.

Total sales increased at a softer pace than in October, but the respective seasonally adjusted index was nevertheless more than four points above its long-run average and consistent with robust growth.

Panellists continued to signal improving international demand for their services.

New export orders increased at a solid rate that was the quickest in three months, but well below those seen around mid-year. Where growth was reported, firms noted gains from clients in Asia, Europe, Latin America and the US.

To accommodate for rising intakes of new business, services firms continued to expand their operating capacities through recruitment drives, the survey said, adding that paired with rising input prices, labor costs exerted upward pressure on inflation.

Overall employment, including permanent and temporary recruitment, rose at the fastest clip since the inception of the survey in December 2005.

Amid reports of higher food and labor costs, service companies observed another upturn in business expenses midway through the October-December quarter.

The service providers were more confident regarding the year-ahead outlook for business activity.

Confidence reached its highest level since May, boosted by predictions of continued demand strength and expectations that marketing efforts will drive new business, added the survey.

The HSBC India Composite Output Index–weighted averages of comparable manufacturing and services PMI indices–was at 58.6 in November, down from 59.1 in October, indicating a sharp rate of expansion.

The goods producing sector recorded a larger slowdown in growth, but still posted a faster increase than that seen in the service economy.

The same trend was evident for new orders.

Services providers signaled sharper cost pressures than manufacturers, and subsequently recorded the steeper increase in selling prices, the survey showed.

Manufacturing activity in the country, too, declined to an 11-month low in November as costs rose and the number of orders declined. The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) slipped from October’s 57.5 to 56.5 last month.