Services sector output stagnated in November after four consecutive months of expansion, as business sentiments hit the decade-low level and order flow turned sluggish, a new survey showed today, painting a “gloomy” picture about economic activities in the country.
The Purchasing Managers’ Index for services sector fell to 50.1 in November, from an eight-month high of 53.2 in October, showing broadly unchanged levels of services sector activity across the country, as per the business survey conducted by Markit and Nikkei. A reading of 50 divides growth and contraction.
The gloomy trend was also observed in the labour market, as employment rose at a pace that was historically muted.
“Service sector output in India broadly stagnated and confidence waned in November, following four consecutive months of increases,” the PMI survey said.
“Services companies in India displayed a lack of optimism with regards to the 12-month outlook for activity, as sentiment dropped to the lowest in the ten-year survey history,” it said.
Commenting on the survey results, Markit Economist Pollyanna De Lima said, “Following an improvement in the prior month, India’s economic growth moved closer to stagnation in November. Gloomy PMI data show a broadbased weakness in output, with little prospect of a rebound apparent in the near term.” The latest data comes within days of the manufacturing sector PMI survey on Tuesday showing that the country’s factory output grew at the slowest pace in 25 months.
The composite PMI for services and manufacturing sectors also dipped to 50.2 in November, from 52.6 in October, indicating “little-change in the level of private sector activity in India”. However, the latest government data showed that India’s economy grew by 7.4 per cent in July-September quarter, outpacing China to become the fastest growing major economy.
The Reserve Bank has left its policy rates unchanged, as was widely speculated, and promised more easing when permitted within its key task of keeping inflation under check.
On the prices front, output prices in services sector however stabilised in November. The survey members blamed fierce competition and frail economic conditions for the slowdown in growth of new work. Lima said that weak demand led to the services companies witnessing the slowest rise in incoming new work since July.
“As a consequence, business activity stood still and confidence waned... Increases in food and petrol prices led to further inflationary pressures in the private sector.
Nonetheless, cost inflation was below the long-run survey average. The slowdown in growth reportedly restricted pricing power and selling prices were left unchanged,” she added.