India June Services PMI at 33.7; Order book volumes hit hard by economic weakness

Although the downturn lost further momentum in June, it remained excessively strong as the COVID-19 pandemic curtailed intakes of new work and disrupted business operations.

Jul 03, 2020 11:07 IST India Infoline News Service

The Indian service sector remained under intense strain during June, according to the latest PMI survey, as activity fell at another substantial month-on-month rate amid the ongoing economic disruption caused by the coronavirus disease 2019 (COVID-19) pandemic. Although the deterioration was weaker than in both April and May, owing to stabilisation in output levels at some firms, the latest reduction was still stronger than any seen prior to the virus outbreak by a wide margin.

The IHS Markit India Services Business Activity Index recorded 33.7 in June. This was up sharply from 12.6 in May, but remained below the neutral 50 mark for a fourth successive month, signalling another decline in service sector output. Although the downturn lost further momentum in June, it remained excessively strong as the COVID-19 pandemic curtailed intakes of new work and disrupted business operations. The slower rate of decline was reflective of some stabilisation in activity levels, with around 59% of firms reporting no change in output since May. Meanwhile, only 4% registered growth, while 37% recorded a reduction.

Amid the ongoing disruption to economic activity caused by the COVID-19 pandemic, survey respondents pointed to further weakness in demand conditions. Total new orders fell at a sharp pace during June, which firms attributed to reduced consumption habits and lower requirements at key clients. In some instances, customers had closed their businesses due to the unfavourable environment. Weak demand was particularly acute on the international front, with survey data pointing to yet another steep drop in export sales. Restrictions related to travel hindered overseas orders, according to anecdotal evidence.

The Composite* PMI Output Index, which measures combined services and manufacturing output, rose to 37.8 in June, up from 14.8 in May but still below the crucial 50.0 level which separates growth from contraction. Overall, the latest data signalled a further steep, albeit considerably slower rate of decline in private sector activity. Both manufacturing and service sector output fell when compared to May, although rates of decline differed vastly. While manufacturing production fell moderately, edging closer to stabilisation, services activity continued to decrease substantially. Demand conditions facing both sectors remained subdued in June, although, as was the case with output, the service sector observed the stronger reduction in orders. Consequently, there was a broad-based decline in employment.

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