Despite manufacturing growth falling to a 14-month low in February, the services sector saw a sharp uptick in the month with the purchasing managers index soared to 59 from the January reading of 56.5 which was a 26-month low, buoyed by improving domestic and international demand resulting in a quicker expansion in output and a substantial increase in employment, a monthly survey has shown.
According to the seasonally-adjusted services PMI, compiled by HSBC India, the index rose from January's 26-month low of 56.5 to 59 in February, indicating a sharp rate of expansion. In the PMI parlance, any reading below 50 is contraction and above 50 is growth.
Monday the agency said the manufacturing sector growth slowed to a 14 month low in February, the lowest reading since December 2023.
"The services business activity index rose to 59 in February up considerably from January's 26-month low of 56.5. Global demand, which grew at its fastest pace in six months according to the new export business index, played a major role in driving output growth for the services sector," said Pranjul Bhandari, the chief economist at HSBC India.
According to the survey, productivity gains, favourable underlying demand and greater intake of new business. Moreover, gains in overseas orders supported the growth uptick, with service providers reporting better demand from Africa, Asia, Europe, the Americas and the Middle East.
To accommodate for the rising new business and alleviate capacity pressures, services companies continue to pursue recruitment drives. Accordingly, employment expanded sharply, and at one of the fastest rates seen since data collection began in December 2005.
"Job creation and charge inflation remained strong during February. Looking ahead, business sentiment remains broadly positive, but did slightly slip last month to its lowest level since August 2024," Bhandari said.
Meanwhile, the composite output index rose from 57.7 to 58.8, indicating a substantial rate of expansion. 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 the official GDP.