MUMBAI: The services sector regained momentum in November, with business activity expanding at a faster pace after a mild slowdown in October, with the activity expansion index printing in at 59.8. According to the HSBC services purchasing managers index (PMI) survey, compiled by S&P Global, the seasonally adjusted index rose to 59.8 in November, up from 58.9 in October, signalling a “historically sharp” expansion in output, the British bank said in a note Wednesday.
Pranjul Bhandari, chief economist at HSBC India, said, "the services PMI rose from 58.9 in October to 59.8 in November, driven by robust new business intakes that fuelled output growth. However, international sales expanded at an eight-month low due to fierce overseas services competition."
"Input price inflation reached its lowest rate in nearly five-and-a-half years, resulting in negligible increases in selling charges. However, employment growth remained modest, with most companies reporting no change in payroll numbers," she said.
Demand for services became stronger, with new orders rising quickly. The increase was faster than in October and higher than the usual long-term trend, she said. However, new export orders grew at a slower pace. Growth was still good, but the weakest in eight months. Asia, Europe and the Middle East were some of the top markets.
At the same time, tough global competition and cheaper services from other countries held back growth. According to the data, companies added more jobs in November, but the increase was mild and at a similar pace as compared to the past two months. Firms not feeling pressure on their capacity, and pending work staying almost unchanged, were some of the key reasons for slower job creation.
Service companies reported a small rise in their expenses, especially for electricity, food, rent and software. But overall cost increases fell to their lowest level since August 2020.Given that the costs are easing and companies want more work, fewer firms increased their own prices in November. Price increases are the lowest in over four years and almost too small to matter.
Meanwhile, HSBC said the composite PMI was lower at 59.7 in November, lower than 60.4 in October. "Composite PMI remained strong, though it softened slightly in November, reflecting a slowdown in growth of factory production," said Bhandari. Growth in output and sales slowed for manufacturers, while it became faster in the services sector.
Both manufacturers and service companies saw a clear slowdown in the rise of their input costs. Overall, expenses increased at the weakest rate in more than five years. Also, the manufacturing MPI eased in November to 56.6, down from 59.2 in October, signaling the weakest improvement in operating conditions in nine months since February. Total new orders and output continued to grow at above-trend rates but at their weakest pace in nine months.