MUMBAI: Services sector growth saw a slight moderation in February with the monthly sectoral PMI easing to 58.1 amid slower new order growth which hit a 13-month low and rising inflation for inputs that rose to a two-and-a-half-year high.
According to the HSBC India services PMI, growth moderated to 58.1 in the reporting month from 58.5 in January, indicating a slower pace of expansion as new order growth slowed to a 13-month low due to rising competition, but international sales saw a notable increase.
Another negative was the steep rise in input and output price inflation, with service companies passing on higher expenses for food and labour to customers, the survey, compiled by S&P Global, said Wednesday. It added that despite rising inflation, business confidence in the services sector climbed to a one-year high as companies aimed to broaden their market presence.
Meanwhile, the survey said the composite PMI output index rose to 58.9 in February, reflecting the fastest pace of private sector activity growth in three months, driven by strong manufacturing momentum.
In the purchasing managers' index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.
"The seasonally adjusted services PMI business activity index also eased to 58.1 in February from 58.5 in January, signalling another month of robust expansion in the sector. While new order growth slowed to a 13-month low amid rising competition, service providers saw a notable pick-up in international sales and responded with increased hiring to meet operational needs," said Pranjul Bhandari, chief economist at HSBC India.
According to the survey, greater client enquiries and marketing efforts supported sales at some units, while a few companies suggested that an increasingly competitive environment dampened growth.
One area of strong performance was exports, as services firms reported gains from many parts of the world, including Canada, Germany, mainland China, Singapore, the UAE, England and the US. On average, international sales expanded at the fastest pace since last August.
On the price front, February data highlight the sharpest increase in operating expenses among services firms in two-and-a-half years. Accordingly, prices charged for the provision of services were raised to the greatest extent in six months.
"Input and output price inflation accelerated, with firms passing higher expenses--particularly for food and labour--on to customers, yet business confidence climbed to its highest level in a year as companies looked to broaden their market presence," Bhandari said.
Meanwhile, the aggregate business activity across the country rose at the fastest pace in three months in February, buoyed by a substantial improvement in demand and an associated upturn in new business intakes. As a result, the composite PMI output index rose from 58.4 in January to 58.9 in February.
"Overall, the composite PMI rose to 58.9, reflecting the fastest pace of private sector activity growth in three months, buoyed by strong momentum in manufacturing," Bhandari said.
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.
The rate of new order growth at the composite level was broadly similar to that seen around the turn of the year, while job creation accelerated to its strongest since last October.
On the price front, there were quicker increases in both input costs and output charges. Respective rates of inflation climbed to nine- and six-month highs.