December data highlighted an improvement in the health of the Indian service sector, with a quicker upturn in new business boosting output growth as the services industry saw activity increase at the fastest pace in six months since June 2022 on robust demand.
The S&P Global India services purchasing managers' index (PMI) rose to 58.5 in December from 56.4 in the previous month, above the 50-mark separating growth from contraction for the 17th straight month since June 2013.
As per the private survey, more jobs were created and companies remained strongly upbeat towards the year ahead outlook for business activity. There was a sharp rise in firms' expenses — amid greater energy, food, staff and transportation costs — which led to a further increase in prices charged for the provision of services.
Although capacities came under pressure from robust intakes of new work, December data pointed to only a mild increase in outstanding business. The latest rise in backlogs took the current stretch of accumulation to a year, and the rate of growth quickened from November.
"Inflation trends were mixed, as input prices rose at a faster pace and the upturn in charges moderated. On the expense front, services firms reported pressure from energy, food, staff and transportation costs. Although easing from November, the rate of output charge inflation remained elevated as several companies felt the need to transfer escalating costs through to clients," said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.
Positive sentiment and ongoing growth of new business continued to support job creation, but there were areas where capacities were reportedly adequate to cope with current requirements, added De Lima.
Predictions of further improvements in demand and marketing plans continued to support business confidence in December. Companies were at their least upbeat in three months, but the overall level of positive sentiment remained above its long-run average. Competitive pressures and inflation concerns dampened overall optimism, the survey said.
Meanwhile, India’s manufacturing activity rebounded to a 26-month high in December led by strong expansion in new orders and production, according to a private survey released earlier this week, as the S&P Global India Manufacturing PMI rose sharply to 57.8 in December from 55.7 in November.
India's December services sector growth at highest level in 6 months | Mint - Mint
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