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Services PMI contracts for 5th consecutive month

Thursday, 5 December 2013 - 9:14am IST | Place: Mumbai | Agency: DNA

The country’s services sector activity continued to contract for the fifth month in a row due to a decline in new work orders. In November, the HSBC Purchasing Managers’ Index (PMI) was at 47.2, marginally lower than 47.1 in October.

Any PMI reading below 50 indicates contraction, while a reading above 50 signifies expansion. “Service sector activity remains subdued, but would at least appear to be stabilising,” said Leif Eskesen, chief economist for India & ASEAN at HSBC.

The sharpest drop was seen in the sub-sector of hotels and restaurants for the third month in a row. Barring post and telecommunication, all other sub-sectors witnessed lower business activity.

New orders fell for the fifth successive month though at a slower pace, while outstanding business rose for the first time in four months. “Service-providers indicated that delayed payment from clients and cash-flow problems resulted in higher unfinished work,” said HSBC in a note. New orders fell because of weaker demand, competitive pressures and tough economic conditions.

Employment rate in the services sector was mostly unchanged from the previous month. Both input and output inflation rose in November as service-providers passed on the burden of higher costs to clients. “Economic activity is expected to remain soft as high inflation, tighter financial conditions and structural constraints continue to weigh on growth,” said Eskesen.

The HSBC India Composite Output Index also contracted for the fifth month in a row. Rise in manufacturing activity supported overall index at 48.5 in November, down from 47.5 in October.

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