Service sector activity expanded at the fastest pace in five months for the month of November after having stagnated in the prior month.

Contrasting with the overall improvement in activity, employment fell marginally and business sentiment weakened. Meanwhile, input costs and output charges declined, contrasting with the trend observed throughout the majority of the survey’s history, the HSBC India Services PMI Business Activity Index report said.

Input costs fell for the first time in more than five-and-a-half years. The rate at which input prices decreased was the second-quickest in the HSBC survey’s nine-year history, albeit moderate overall.

The Service Activity Index rose to 52.6 from October’s 50.0, with Post & Telecommunications performing the best of the broad areas monitored, while contractions in activity were registered in financial intermediation and hotels & restaurants.

The report highlighted that business activity was driven higher by faster growth of new business in November, as the respective index posted above the crucial 50.0 threshold for the seventh month in a row. Furthermore, the pace of expansion was solid overall and the quickest since July. Incoming new work also saw an increase.

Growth of activity and new business had little impact on employment in November, as workforce numbers in the Indian service sector declined for the first time in four months. That said, the rate of job shedding was slight overall. According to some panellists, staffing levels fell as a result of labour shortages, the report said.

Indian service providers registered backlog accumulation for the second consecutive month in November. However, the rate of increase eased from the previous month and was moderate overall.

Among the monitored sub-sectors, job losses were evident in renting & business activities and transport & storage.

Meanwhile, anecdotal evidence of lower fuel prices and an appreciation of the Indian rupee against the US dollar was reinforced by survey data in November, as input costs fell for the first time since March 2009.

Finally, companies operating in the Indian service sector remained optimistic regarding prospects for activity growth in November. However, despite improvements in activity and new business, sentiment slipped to the weakest since mid-2007, the report added.

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