December services PMI hits 10 month high of 53.6

NEW DELHI: Buoyed by a rise in incoming new work and strengthening demand conditions, India's service sector output touched a 10-month high in December with the seasonally adjusted Nikkei Services Business Activity Index climbing to 53.6 compared with 50.1 in November.

Service output growth is in sharp contrast to manufacturing activity which contracted for the first time after 25 months as showed by the Nikkei India Manufacturing Purchasing Managers' Index which dipped to 49.1 in December from 50.3 in November, as per data shared by the same organisation on Monday.

A reading above 50 on this survey-based index shows expansion, while a figure below that indicates contraction.

However, overall the composite PMI output index has indicated a rebound in growth of private sector activity as the index rose from November’s five-month low of 50.2 to 51.6 in December.

"The Indian private sector returned to expansion territory at the end of 2015, eking out modest output growth in December. A stronger rise in new business and an improvement in year-ahead expectations at service providers are positive developments, but the overall health of the economy remains fragile amid a weak manufacturing sector," said Pollyanna De Lima, economist at Markit, which compiles the survey.

December saw the rate of cost inflation reach a seven-month high and input prices across the private sector as a whole increased at the fastest rate since May, but one that was modest in the context of historical data.

On the recruitment front, after hiring workers in the previous month, services companies left payroll numbers unchanged in December. In contrast, goods producers took on additional staff, although the rate of job creation was only marginal. At the composite level, staffing levels were broadly unchanged, the survey noted.