June services PMI soars to eight-month high on new orders

NEW DELHI: Activity in India’s services sector expanded at its fastest pace in eight months in June, as new business orders surged and demand improved, a private survey showed on Wednesday. The Nikkei/IHS Markit Services Purchasing Managers’ Index (PMI) rose to 53.1 in June from 52.2 in May. A reading above 50 indicates expansion.

Unlike the manufacturing sector that saw a slowdown in activity in the run up the launch of goods and services tax from July 1, the services sector has not been impacted.“Growth of service sector activity and inflows of new business picked up as better demand conditions and marketing efforts bore fruit,” said Pollyanna De Lima, an economist at IHS Markit and the author of the report.

Employment rose modestly across sector, rising to May’s near four-year peak.

Another survey from the same firm on Monday had shown manufacturing activity slowing to a four-month low in June at 50.9. Put together, the seasonally adjusted Nikkei India Composite PMI Output Index rose from 52.5 in May to an eight-month high of 52.7 in June, the highest since the second quarter of 2016.“This suggests that GDP growth is likely to rebound from the sharp slowdown noted in the first three months of 2017,” De Lima said.

India’s economic growth slowed to 6.1% in the January-March quarter from 7% three months earlier due to the impact of demonetisation. Finance minister Arun Jaitley expects GDP to grow 7.5% in 2017-18, higher than the 7.1% expansion reported for 2016-17.

Activity and incoming new work rose in four out of the six broad categories covered by the survey, except for hotels and restaurants and renting and business activities. The best-performing sub-sector in June was financial intermediation, where growth rates surpassed those seen elsewhere.

Still, De Lima said optimism weakened at goods producers and service providers alike, hampered by concerns among some firms that GST could harm consumer demand. Competitive pressures was seen as another threat to outlook.