Inflation undermines business confidence, with only 9% of firms expecting growth a year later
Inflation undermines business confidence, with only 9% of firms expecting growth a year later
For India’s services firms, new business and output grew at the fastest pace since early June 2011, rising from 58.9 in May to 59.2 in June, according to the survey-based S&P Global India Services Purchasing Managers’ Index (PMI). A reading of over 50 on the index indicates an increase over the previous month.
With input costs continuing to rise, firms raised selling prices at the fastest rate since July 2017 as they transferred part of their additional cost burdens to customers, with the fastest increase in prices in transportation, information and communication services. had demanded to do.
High food, petrol, retail and staff costs were cited to raise production prices and were ‘unreliable’. inflation concerns With only 9% of firms expecting production growth a year ahead, overall confidence levels plummeted. Only 6% of those surveyed hired more employees in June, while the rest did not change their workforce despite high demand. Overall employment grew marginally after a fall in May.
“Activity growth in India’s services sector picked up again in June, reaching its strongest level in 11 years and the third month seen in manufacturing,” said Polyana de Lima, economics associate director at S&P Global.
“Demand for services improved the most since February 2011, supporting a strong economic expansion for the sector in the first quarter of 2022-23 and setting the scene for another significant increase in production next month. Consumer Services posted the strongest growth in both output and new orders in June, but growth accelerated across the board,” she said.
ICRA Chief Economist Aditi Nair said the jump in Services PMI reaffirms her view that the sector will lead the growth recovery this year.
“Medium to high-income households are likely to prioritize spending over contact-intensive services, which were avoided during the pandemic, at the expense of consumer durables. This is likely to result in a slower recovery in capacity utilization levels, with private There is a slight delay in planning sector capex amid global adversities and higher commodity prices.”
The recovery in the services sector offset slower growth in India’s manufacturing activity, reflected in the latter’s PMI falling from 54.6 in May to 53.9 in June. As a result, the S&P Global India Composite PMI Output Index stood at 58.2, having changed little from 58.3 in May. Altogether, private sector jobs After a partial decline in May, it rose in June, with employment in both manufacturing and services registering modest growth.