MUMBAI: The dominant services sector continued its strong pace hitting a 15-year high in August on new orders and rising output led by international demand with the sectoral purchasing managers index (PMI) climbing to 62.9 in the reporting month from 60.5 in July. This is the strongest pace of growth since 2010. British lender HSBC said on Wednesday, its monthly services PMI, compiled by S&P Global, rose to a near record high of 62.9 in August, on new orders which rise for the 49th consecutive month.
Demand buoyancy, efficiency gains, and greater inflows of new business are among the key reasons for the strongest growth since 2010. New orders grew for the 49th month in a row, and at the fastest pace in more than 15 years. About 37% of service providers reported growth, compared to only 11% who saw a decline, the report said.
"The broad-based expansion in international sales bolstered overall demand, which prompted the domestic services firms to hire additional workers. Reflecting higher labour costs and robust demand conditions, both input and output prices rose substantially in the reporting month," said Pranjul Bhandari, the chief economist at HSBC India.
Last week the she had said the flash manufacturing PMI surged to 65.2 in August on record services, which was the highest on record while the composite PMI rose to a 15-mth high at 61.1 on manufacturing jump. Export orders rose at the third-fastest rate since this this segment was added to the survey in 2014, with higher demand coming from clients in the US, Europe, and the West Asia.
Hiring by services sector also picked up marginally in August which though is only at a tepid pace from July yet remains moderate overall, with most new jobs being part-time. This steady job creation helped companies manage workloads. Backlogs increased marginally during the same period. With both hiring cost and input costs rising overall business expenses also rose at the fastest pace since last November, mainly due to higher labour costs such as salary hikes and overtime pay.
Some firms also reported increased transport and material costs. The report also said business confidence has improved to a five-month high, supported by higher advertising budgets and expectations of strong demand. Some companies also expect to take on more work thanks to recent staff recruitment. Meanwhile the report said, the composite PMI output index rose to 63.2 in August from 61.1 in July, indicating the sharpest pace of expansion in over 17.5 years. The increase highlighted a pick-up in growth of output across India’s manufacturing and services sectors.“
The composite PMI rose to a 17.5 high of 63.2 in August, indicating strong broad-based output growth in both the manufacturing and service sectors,” said Bhandari, adding the manufacturing activity also reported a strong growth in August, with the manufacturing PMI touching an 18-year high of 59.3, driven by strong domestic demand, despite concerns over steep US tariffs.