September services sector growth moderates from 42-month high in August

The Services Purchasing Managers' Index in the country contracted to 52 in September from 54.70 in August, Nikkei's PMI data showed, according to tradingeconomics.com

MarkitEconomics, which releases the data, said, "The health of the Indian private sector economy improved in September but to a lesser extent than in August. Output and new business increased at softer rates in both, the manufacturing and services sectors."

Recently announced manufacturing sector data showed that manufacturing had moderated in the month of September. 

"Reflecting softer expansions in activity at both, service providers and manufacturers, the seasonally adjusted Nikkei India Composite PMI Output Index fell from August's 42-month high of 54.6 to 52.4 in September," Nikkei said.

However, the reading for the services sector still above 50, was the fifteenth in as many months, highlighting ongoing growth in the country, the statement said. 

A reading above 50 indicates growth in the sector, while a reading below 50 indicates contraction. 

Source: TradingEconomics.com

In September, the level of new business placed with Indian services firms increased moderately following a solid rise in August, it said. 

While demand growth was sustained, competitive pressures and unfavourable weather conditions weighed on new work inflows, Nikkei said. 

"Prices charged by Indian service providers increased in September, as was the case in August. Survey respondents attributed higher
output prices to rising cost burdens. Factory gate charges also increased at a quicker pace that was, nonetheless, weak by historical standards," Nikkei said. 

"Business optimism among Indian service providers fell in September, with the degree of confidence remaining below its long-run average," the statement said. 

Challenging market conditions were frequently reported by panellists as a key factor weighing on sentiment, it added. 

“Service sector performance in India continued to improve relatively modestly in September, a trend that has been evident throughout the year-to-date. With manufacturing also on a softer footing, growth of private sector output and new orders eased in the latest month," Pollyanna De Lima, economist at IHS Markit, and author of the report said. 

“Over Q2 FY2016/17, however, the PMI Composite Output Index posted its highest reading since the Jan-Mar 2015 quarter, thereby suggesting a pick-up in GDP growth. This would be welcome by policy makers after the below-expectations figure of +7.1% y/y recorded in Q1.

"The ongoing upturn in new work combined with muted employment growth led backlogs of work across the private sector to increase at the quickest pace in nearly two-and-a-half years. As a result of this, businesses may be more willing to take on additional workers as we head to the year end."