HSBC India March services PMI at 47.5 vs 48.8 in Feb

Manufacturing production growth eases and service sector activity falls at faster rate

April 03, 2014 10:53 IST | India Infoline News Service
Business activity in the Indian private sector fell in March, following a fractional increase in the previous month. Adjusted for seasonal influences, the HSBC India Composite Output Index declined from 50.3 in February to 48.9. Production at manufacturers rose at a weaker rate, whereas service sector output dropped again.

The headline HSBC Services Business Activity Index adjusted for seasonal factors fell from 48.8 in February to 47.5 in March. Registering below the 50.0 no-change level for the ninth successive month, the latest reading pointed to a moderate drop in activity that was the most pronounced since last December. Anecdotal evidence highlighted falling new orders and a difficult economic climate. Sector data signalled lower new business in three of the six categories, namely Financial Intermediation, Renting & Business Activities and Transport & Storage.

New business received by Indian services companies decreased for the ninth month running in March. As was the case for output, the rate of contraction was the quickest in three months. Panellists commented that weaker client demand, partly linked to the forthcoming elections, led to the latest drop in new work intakes.

New orders placed at manufacturing companies rose at a softer rate. Concurrently, incoming new work in the private sector as a whole decreased, although slightly. Backlogs of work in the Indian private sector were reported to have increased during March, with both manufacturing and services companies signalling expansion. Service providers linked the latest accumulation in outstanding business to cashflow difficulties and delayed payments from clients, while manufacturers commented on raw material shortages.

March data signalled employment growth in the Indian service sector, but the rate of increase was only slight. Where job creation was reported, this was attributed to forecasts of higher levels of new work in coming months. Payroll numbers in the private sector as a whole rose, although slightly and at a broadly unchanged pace from February.

Inflationary pressures in the Indian private sector softened during March, with both input costs and output prices rising at weaker rates. Additionally, input cost and output price inflation were weak in the context of historical data. Softer increases for charges and costs were registered at both manufacturers and service providers.

Indian service providers were optimistic in March that activity would rise over the next 12 months. Growth of new business, supported by improved economic conditions and new marketing initiatives, is expected to drive the expansion in activity. Confidence strengthened in the latest month and was at its highest since last July.

Commenting on the India Services PMI survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said: “Following some stabilization in recent months, service sector activity weakened again in March led by softer domestic demand. Meanwhile, inflation pressures eased. Looking ahead, growth is expected to remain subdued in coming months, but pick up gradually during the second half of 2014. This, however, assumes that the election outcome provides the elected government with a workable mandate."

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