Indian service providers signal robust growth in October on strong demand conditions

New Delhi: India's services PMI recovered from its ten-month low in September to reach 58.5 in October supported by strong expansions in output and new business, which in turn boosted job creation, a monthly survey said on Wednesday.

The seasonally adjusted HSBC India Services Business Activity Index increased from 57.7 in September to 58.5 in October, as robust sales pipelines and strong demand conditions supported the upturn in business activity.

In the Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

"India's services PMI recovered from its ten-month low in September to reach 58.5 last month. During October, the Indian services sector experienced strong expansions in output and consumer demand, as well as job creation, which achieved a 26-month high," Pranjul Bhandari, Chief India Economist at HSBC, said.

The latest data also highlighted a recovery in growth of new export sales across India's service economy, which survey respondents attributed to strengthening demand from clients in Africa, Asia, the Americas, the Middle East and the UK.

In response to positive sales developments, and optimism regarding near-term prospects, firms recruited extra workers to the greatest degree in just over two years.

Moreover, capacity pressures also boosted job creation. Around 13 per cent of panellists reported job creation, compared to 9 per cent in September.

Input price inflation accelerated to a three-month high in October, with services companies mainly reporting higher food and wage costs. Companies shared part of their additional cost burdens with clients by continuing to lift selling prices.

Exactly one-quarter of the survey panel forecast higher output volumes over the coming year, linked to healthy demand trends, marketing efforts and new client enquiries. At the same time, 74 per cent of firms foresee no change in business activity from present levels.

Meanwhile, the HSBC India Composite Output Index rose from September's 10-month low of 58.3 to 59.1 as new business inflows also expanded at quicker rates in both the manufacturing and service sectors, boosting growth of sales and employment at the composite level.

Goods producers recorded stronger rates of increase in new business and output than service providers in October, but the latter led when it came to job creation.

On the price front, rates of input cost inflation were equal in the manufacturing industry and the service economy.

Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices. Weights reflect the relative size of the manufacturing and service sectors according to official GDP data.