Services PMI rises to a five-month high in August

The HSBC India Services Business Activity Index, or services PMI, hit 60.9, reflecting robust demand and reduced inflationary pressures. Finance & Insurance emerged as the top-performing sector in India’s service economy, excelling in both output and new business.  

According to data released by S&P Global, in August, India’s services sector reached a five-month high with the HSBC India Services Business Activity Index (services PMI) climbing to 60.9, up from 60.3 in July. This indicates the strongest rate of expansion since March and is significantly above the long-term average. The increase in PMI reflects resilient demand and easing inflationary pressures, driven by productivity gains and favorable demand trends.

The S&P Global survey highlighted that the robust start to the second fiscal quarter continued into August, with business activity expanding at its highest rate since March. This growth was supported by a rise in new business orders and solid payroll increases, as companies maintained a positive outlook on the economy. A key positive development was the deceleration in output charge inflation, aided by cost pressures falling to their lowest levels in four years.

New order growth extended to 37 consecutive months in August, with a slight acceleration from July and the strongest increase since April. Despite strong domestic demand, the growth of international orders slowed to a six-month low due to softer global conditions. Overall business confidence remained positive but dropped to its lowest level in over a year. The increase in total sales was primarily driven by the domestic market, while export business growth slowed.

Sector performance varied, with Finance & Insurance emerging as the best-performing area in terms of both output and new business. However, the sector experienced moderate cost pressures due to rising food, labor, and transportation costs, although overall inflation remained modest and was the weakest since August 2020.

On the other hand, Consumer Services saw the sharpest rise in input costs in August. Charge inflation was notably high in the Transport, Information, and Communication sectors.