Services PMI Eases in February, Inflation at 2-Year Low: S&P Report

Ira Singh
Khabar Khabaron Ki,06 Mar’24

India’s service sector business activities expansion experienced a deceleration in February compared to the previous month due to a slowdown in growth in new orders and output even as inflation declined to the lowest level in two years, according to a recent industry survey conducted by S&P Global.

Purchasing Managers’ Index (PMI) for services declined to 60.6 in February, down from 61.8 recorded in the previous month. Despite the easing, the growth remains robust. PMI reading above 50 indicates growth in the sector while below 50 shows contraction. According to reports, PMI print has been above 50 for 31 months.

New business from abroad placed with services firms in India rose for the 13th successive month. Survey participants reported gains in business from Australia, Asia, Europe, the Americas and the UAE. Collectively, international sales expanded at a solid rate that was among the best in the nine-and-a-half-year series history, S&P Global stated in a monthly report.

Business confidence regarding the year-ahead outlook for activity weakened in February. Only around 26% of companies participating in the survey, foresee growth.

The report further highlights concerns within the business community regarding workforce optimization and current operational requirements. The report states, that lower business confidence dampened employment growth as the pace of hiring growth was the slowest in 21 months, stated the report.

Both input and output price inflation moderated in the month, indicating controlled price pressures. Services inflation declined to the lowest level in two years. Operating expenses rose further, but the pace of increase was the second lowest since August 2020.

Despite some fluctuations, both the services and manufacturing sectors have witnessed robust expansion in recent months. Manufacturing PMI rose to 56.9 in February, the highest level in five months, helped by lower inflationary pressure and high global demands.

“The manufacturing and services PMIs continue to exhibit remarkable demand strength in the economy since 2023, corroborated to an extent by the hard GDP data of Q4 2023,” Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics, Barclays, quoted as saying.

“We accordingly raised our GDP growth forecast for FY2023-24 and FY2024-25 to 7.8% and 7%, respectively,” he added. In the recent October-December quarter (Q3 FY2023-24) India’s GDP growth surged to 8.4%, beating expectations.