The manufacturing purchasing managers index fell to 56.5 in November, the lowest in 11 months, following which the services index for the month under review slipped marginally to 58.4, remaining in the expansion zone. Jobs were created at an impressive pace in November.
HSBC conducted a business survey for the services sector, with inputs from the industry's purchasing managers. According to the survey, services sector growth dipped in November as new orders and output receded, while consistent demand led to a rise in business sentiment even as hiring surged.
The headline purchasing managers index (PMI), compiled by S&P Global for HSBC, printed in at 58.4 in November, marginally down from 58.5 in October but lower than a preliminary estimate of 59.2. The index has been above the neutral 50-mark that separates contraction from expansion for the 40th straight month.
"Survey participants remarked on demand strength and new business gains," said the survey released on Wednesday. It noted that the industry continued to report improving international demand, with new export orders increasing at a rate that was the quickest in three months but below those seen around mid-year.
"Where growth was reported, companies noted gains from clients in Asia, Europe, Latin America and the US," Pranjul Bhandari, the chief economist at HSBC India, said, adding sectoral employment grew at the fastest pace ever since the survey began in 2005.
On the employment front, the survey highlighted services firms expanded their operating capacities through recruitment drives to accommodate rising new business intakes.
"Hiring surge reflects the sector’s improving business confidence, growing new orders, and vigorous international demand. At the same time, high food prices and labour costs drove up input and output prices to their fastest rates in 15 months and nearly 12 years respectively," Bhandari said.
Services companies continued to expand their operating capacity through recruitment drives to accommodate new business.
Anecdotal evidence highlights a combination of permanent and temporary hires in November; the downside to this "unprecedented upturn" in job creation is an intensification of price pressure. Input costs rose to the "greatest extent" in 15 months while selling prices increased at the fastest rate in about 12 years.
"This intensification of cost pressures has prompted service providers to lift their own charges in the reporting month. On some occasions, companies suggested that hikes were supported by rosy demand. Output prices increased at the fastest rate in close to 12 years," said the survey.