August services output slows to 50.6 but still growing

NEW DELHI: Output in India’s services sector registered a fourth successive monthly expansion in August, although the pace of expansion was the slowest in three months as order flows and business optimism moderated, a private survey showed on Wednesday.

The seasonally adjusted HSBC India Services Business Activity Index posted a reading of 50.6 in August, down from 52.2 in July. A reading of 50 separates growth from contraction.

The sector, which accounts for about 55% of total income generated in India, was facing a downturn for about a year until April, mainly because of poor showing by manufacturing. "Growth in services sector slowed in August. Moreover, improvement in new business flows and business optimism moderated," Frederic Neumann, cohead of Asian Economic Research at HSBC, said.

"Services activity is once again turning down following a swift post-election uptick, suggesting that an improvement in reform momentum is needed to lift sentiment in the sector."

The services PMI, compiled by financial information services company Markit, is based on a survey of purchasing executives in about 350 private service sector companies. Services growth was broad-based with only hotel and restaurant companies reporting a reduction, according to the survey.

Data from India’s Central Statistical Office shows the sector grew just 2% in the first quarter of 2014-15. Post and telecom firms recorded the fastest growth. Backlogs of work held by services companies continued to grow in August, extending the current sequence of accumulation to six months, it said.

Price pressure was elevated. According to the survey, expectations regarding future activity at service providers remained positive in August.