Services sector growth accelerates to 5-month high in Aug, PMI shows

Services sector growth: Activity in India's dominant services sector rose at its fastest pace in five months in August as demand remained resilient amid easing inflationary pressures, a survey showed.

The HSBC final India Services Purchasing Managers' Index INPMIS=ECI, compiled by S&P Global, rose to 60.9 in August, up from July's 60.3 and exceeding a preliminary estimate of 60.4.

The reading, which has topped the 50-mark separating growth from contraction since August 2021, was above the long-run average and marked the highest level since March.

"This growth was largely fuelled by an increase in new orders, particularly domestic orders," said Pranjul Bhandari, chief India economist at HSBC.

The new business sub-index rose slightly from July to a four-month high and was above its historical average.

International demand was also solid but the pace of growth softened sharply from July to a six-month low.

Similarly, while business confidence remained positive in August it slid to its lowest in more than a year. Firms were optimistic about resilience in demand and hoped to see better growth in the year ahead.

Hiring in the services sector continued at a solid pace, despite easing to its weakest since April.

Cost pressures rose moderately last month on elevated food, labour and transportation costs, though the increase faced by service providers slowed to a four-year low.

"On a positive note, input costs rose at their slowest pace in six months, with both the manufacturing and service sectors exhibiting the same pattern. Consequently, output price inflation receded in August," added Bhandari.

With inflationary pressure easing firms passed on costs to clients at a much milder pace than in July.

Data last month showed inflation in India eased to a near five-year low of 3.54 per cent in July, largely reflecting a high-base effect that suggested the slowdown was temporary. Inflation will average 4.2 per cent this quarter and 4.6 per cent next, a Reuters poll predicted.

A manufacturing PMI INPMI=ECI released on Monday dipped to a three-month low of 57.5 in August but the improvement in services activity kept the overall Composite PMI unchanged from July's 60.7.