PMI signals fastest rebound in services activity in 18 months

‘Output expands first time in 4 months, rising consumer footfall boosts sales’

India’s services sector expanded in August at the fastest pace in one-and-a-half years amid strong inflows of new work and improved demand conditions, a monthly survey showed on Friday.

The seasonally adjusted India Services Business Activity Index rose from 45.4 in July to 56.7 in August, as the reopening of several establishments and increased consumer footfall boosted sales.

The services sector witnessed the first expansion in output in four months and a rebound in business confidence. In Purchasing Managers’ Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction. “The Indian service sector bounced back in August, led by the reopening of several establishments and improved client confidence due to growing vaccine coverage,” said Pollyanna De Lima, economics associate director at IHS Markit.

New orders placed with service providers rose in August, ending a three-month sequence of reduction. Moreover, the pace of expansion of orders was the quickest in more than eight-and-a-half years. However, firms saw a further decline in new export orders. The downturn was often associated with the pandemic and travel restrictions.

“Service providers foresee a brighter outlook, with firms indicating that the economic recovery could be sustained if restrictions continue to be lifted and further waves of contamination can be avoided,” Ms. De Lima added. Still, service providers again cut headcounts in August, though the rate of job shedding was marginal and the weakest since January.

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