Despite inflationary pressure, the services sector performed well in November, a private survey report released on Wednesday showed. The survey result, known as the Purchasing Managers’ Index (PMI), came in at 58.4 in the said month.
Meanwhile, service providers signalled an unprecedented rise in employment. Services has a 53 per cent share in Gross Value Added (GVA), a parameter to measure supply in the economy.
“During November, services sector employment notably grew at the fastest pace since this survey began in 2005. The hiring surge reflected the sector’s improving business confidence, growing new orders, and vigorous international demand,” Pranjul Bhandari, Chief India Economist at HSBC, said. PMI is prepared based on survey results derived from the response of purchasing executives of 400 companies. An index above 50 reflects expansion, while below 50 means contraction.
The report accompanying the survey results said to accommodate for rising intake of new business, services firms continued to expand their operating capacities through recruitment drives. Anecdotal evidence highlighted a combination of permanent and temporary hires in November. However, like manufacturing, service providers, too, faced pressure of inflation.
Amid reports of higher food and labour costs, service companies in India observed another upturn in business expenses midway through the third fiscal quarter. The rate of inflation was sharp, the strongest in 15 months, and above its long-run average. This intensification of cost pressures reportedly prompted service providers to lift their own charges in November. On some occasions, companies suggested that hikes were supported by rosy demand. Output prices increased at the fastest rate in close to 12 years, the report said.
Further, total sales increased at a softer pace than in October, but the respective seasonally adjusted index was nevertheless more than four points above its long-run average and consistent with robust growth. Panellists continued to signal improving international demand for their services. New export orders increased at the quickest pace in three months, but well below that seen around mid-year. Where growth was reported, firms noted gains from clients in Asia, Europe, Latin America and the US.
Despite cost pressure, panellists expressed optimism for the future. “Service providers were more confident regarding the year-ahead outlook for business activity. Confidence reached its highest level since May, boosted by predictions of continued demand strength and expectations that marketing efforts will drive new business,” the report said.