The Indian service sector lost momentum in April, with rates of new business and output growth both cooling to seven-month lows. Falling from 52 in March to 51 at the start of the 2019 financial year, the seasonally adjusted Nikkei India Services Business Activity Index pointed to the weakest upturn in output since last September. Moreover, the headline figure dipped below the average seen over 2018 (51.6). Growth was linked to greater bookings, improved facilities and effective marketing, though curbed by competitive pressures and the elections.
“That said, predictions that economic conditions will normalise after the elections underpinned optimism regarding the outlook and supported a stronger upturn in employment. At the same time, rates of inflation for input costs and output charges remained weak by historical standards,” as per Nikkei India Services PMI data.
With the growth of manufacturing production also softening to a seven-month low, the seasonally adjusted Nikkei India Composite PMI Output Index fell from 52.7 into 51.7 in April. The latest figure was indicative of a slight pace of expansion in an aggregate activity that was weaker than seen on average over the series history.
Input price inflation in India’s service economy moderated to the second-slowest rate recorded in almost two years. In fact, close to 98% of companies indicated unchanged cost burdens from March. Across the private sector, the latest increase in input prices was the least pronounced in close to two-and-a-half years.
Commenting on the Indian Services PMI survey data, Pollyanna De Lima, Principal Economist at IHS Markit, and author of the report, said, “Although the Indian private sector economy looks to be settling into a weaker growth phase, much of the slowdown was linked to disruptions arising from the elections and companies generally foresee improvements once a government is formed. “However, voting was not the only reason cited for the slowdown. In the service sector, competitive conditions and a shift towards online bookings among customers reportedly restricted new business gains and in turn growth of activity.”
On a more positive note, the labour market is showing resilience as companies hired extra staff at an accelerated pace. “Another key takeaway from the latest results is the lack of inflationary pressures in both the manufacturing and service sectors, which coupled with slower economic growth offers room for a further cut to the benchmark repurchase rate,” Pollyanna De Lima added.