Services sector growth at 4-month low

New Delhi: India's services sector lost momentum in July as demand was curtailed by competitive pressures, elevated inflation and unfavourable weather, a monthly survey said on Wednesday. The seasonally adjusted S&P Global India Services PMI Business Activity Index fell from 59.2 in June to 55.5 in July, pointing to the slowest rate of growth in four months. For the 12th straight month, the services sector witnessed an expansion in output. In Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion while a score below 50 denotes contraction.

As per the survey, service providers that reported higher sales in July mentioned favourable demand conditions and fruitful advertising. However, growth was dampened by fierce competition and unfavourable weather, survey participants said. The domestic market remained the key source of sales growth as international demand for Indian services worsened further, the survey said.

Meanwhile, business sentiment in the service economy was subdued in July as only 5 per cent of companies forecast output growth in the year ahead, while a vast majority of firms (94 per cent) predict no change in business activity from present levels. On the prices front, services companies reported a further increase in their average expenses during July, with food, fuel, materials, staff, retail and transportation cited as the key sources of inflationary pressures. Input costs rose sharply, though at the slowest pace in five months.

On the jobs front, July data showed a negligible increase in service sector employment across India. The rate of job creation was fractional and broadly similar to June. The vast majority of firms left payroll numbers unchanged amid a lack of need to raise workforces. Meanwhile, the S&P Global India Composite PMI Output Index fell from 58.2 in June to 56.6.