According to reports, India’s service sector PMI has expanded at the strongest rate since November 2021 while input costs inflation climbs to a new record, according to rating agency S&P Global India. PMI went up from 57.9 in April to 58.9 in May. The spurt in PMI was backed by a pick-up in new business growth as demand continued to recover after the reopening of the economy since the relaxation of COVID-19 restrictions.
Business activity in the sector rose at the fastest pace since April 2011. Economics Associate Director at S&P Global Market Intelligence Pollyanna De Lima said, “The reopening of the Indian economy continued to help lift growth in the service sector. Business activity rose at the quickest pace in over 11 years in May, supported by the fastest upturn in new orders since July 2011”, the report said.
The rating agency underlined, “Business confidence among private sector firms in India remained subdued in May, despite improving from April. Manufacturers and service providers were concerned that inflationary pressures would restrict output growth over the course of the coming 12 months.”
According to S&P Global India, service providers mentioned demand continued to strengthen on the lifting of COVID-19 restriction and resumption of events. Spurge in output also reflected better underlying demand and strong inflows of new work.
While services PMI data for May was hopeful on underlying demand, new work, and business growth, it was marred by rising input and output costs, heightened inflation, and rising costs of essential commodities. The highest surge in output costs was reported across the transportation and information and communication sectors, the report said.
Companies in the sector continued to transfer the rising cost burdens onto consumers through a hike in selling prices. The rating agency mentioned, “Underlying data highlighted consumer services as the best-performing area of the service economy in May, where the growth of both new orders and business activity surpassed those seen in the other three monitored sub-sectors”, the report said.
De Lima concluded, “Consumer services remained the brightest spot of the service economy, posting the strongest increases in both new business and output during May. It was here too that the steepest rate of input cost inflation was seen.” (Business Today)
