Slowing growth in new orders cools down services PMI in February

A slowdown in growth of new orders and output slightly weakened the growth in India’s service sector in February, a private survey showed

The HSBC PMI services Purchasing Managers Index (PMI) survey conducted by S&P Global eased to 60.6 in February, down from 61.8 in January. A reading above the 50-mark denotes expansion.

“India’s services PMI suggests that the pace of expansion in the services sector eased in February from January. Due to a slowdown in growth in new orders and output, services companies’ outlook for future business activity, while remaining strongly positive, weakened slightly. Prices charged for services rose at the slowest rate in 24 months as input prices inflation moderated,” Ines Lam, an economist at HSBC, said.

The latest HSBC PMI index also showed the second-weakest cost pressures in the sector since August 2020 and the softest increase in selling charges for two years.

New business from abroad placed with services firms in India rose for the 13th successive month. Survey participants reported gains from Australia, Asia, Europe, the US and the United Arab Emirates.

Collectively, global “sales expanded at a solid rate that was among the best in the nine-and-a half-year series history,” the survey said.

Companies created jobs on the back of rising workloads, but the easing of capacity pressures and lower confidence towards the outlook dampened employment growth. Business activity increased across all parts of the service sector.

Finance and insurance saw the strongest pace of growth by a considerable margin, with the slowest rise registered in real estate and business services.

Data highlighted a notable upturn in demand across the service sector, with inflows of new business expanding for the thirty-first month running. Nevertheless, like for output, the rate growth softened from January’s recent high while remaining well above its long-run average.

The manufacturing sector gathered momentum in February on the back of expansion in new export orders and easing of pricing pressures as the headline PMI climbed to a five-month high of 56.9 from 56.5 in January.

“The HSBC final India Manufacturing PMI indicates that production growth continued to be strong, supported by both domestic and external demand. Manufacturing firms’ margins improved as input price inflation slipped to the lowest since July 2020. Buoyed by robust demand and improving profit margins, manufacturers have an optimistic outlook about future business conditions,” Lam said in a note on 1 March.

Data showed export orders rose at the fastest rate in nearly two years, with anecdotal evidence highlighting Australia, Bangladesh, Brazil, Canada, mainland China, Europe, Indonesia, the US and UAE as sources of demand growth.