Slight improvement in services PMI due to improvement in demand

Expansion Improved demand environment, new trade flows and post-Covid-led easing of restrictions were behind production. However, according to the IHS India Services Business Activity Index released on Friday, growth slowed due to lack of inputs and inflationary pressures.

Note, PMI is a month to month indicator. A reading above 50 indicates expansion in business activity.

Poliana de Lima, economics associate director at IHS Markit, said: “Growth in the services sector failed to rebound meaningfully, as many would have expected, as the January new wave significantly reduced COVID-19 cases and lifted restrictions. Given.” “New business. And services activity expanded only marginally, and at the second slowest rate since last July. Given the anecdotal evidence provided by survey participants, inflationary pressures, lack of inputs and local elections slowed growth,” de Lima said.

Growth in new businesses and production was below the respective long-term average. According to the report, India saw an increase in business confidence, but firms continued to lay off jobs.

While business confidence strengthened in February on hopes of a reversal of the pandemic, the overall degree of optimism was historically muted due to inflationary pressures and concerns over COVID-19.

Operating costs were higher in February due to increase in input costs in key sectors such as chemicals, energy, food, fuel, labour, metals and plastics. Companies continued to pass on additional costs to customers and in February the charges were revised by service providers.

The price of Brent crude on Thursday crossed the level of $ 118 a barrel due to the Russia-Ukraine conflict. Nevertheless, output price inflation moderated to a five-month low and was well below its long-term average.

“While lower than the decade high of January, the rate of input cost inflation remained sharp in February. That said, fewer firms passed the additional cost burden on customers amid weak demand conditions. Production prices rose only slightly, and at the slowest pace in five months,” she said.

According to survey participants, increased sales were driven by marketing efforts, flexibility in demand and adding new customers. International demand for Indian services remained low in February, the fastest rate of reduction in new businesses from overseas since last September. Employment fell for the third straight month and the fastest since July 2021 due to weak new business growth and lack of pressure on capacity.

India’s retail inflation hit a seven-month high in January, led by food and manufactured goods prices rising by 6.01%, breaking the RBI’s upper tolerance band for the first time since June.