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Service sector growth eases in March in India

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Christian Fernsby ▼ | April 5, 2019
March data highlighted a slight setback for the Indian service sector, with output growth softening to a six-month low due to a slower expansion in new work.
Service sector India
Asia   Optimism regarding the year-ahead outlook for business activity strengthened
At the same time, the pace of staff hiring was the weakest since last September.

Encouragingly, optimism regarding the year-ahead outlook for business activity strengthened for the second month in a row.

Input cost inflation eased, while an acceleration was seen for services charges.

At 52.0 in March, the seasonally adjusted Nikkei India Services Business Activity Index indicated expansion for the tenth straight month.

Falling from 52.5 in February, however, the latest reading showed the slowest upturn since last September.

Reports from panellists linked higher output levels to new business wins from domestic and external sources.

Growth was curtailed by subdued bookings and competitive pressures.

A softer increase in manufacturing production was likewise registered, the weakest since September 2018.

Subsequently, the seasonally adjusted Nikkei India Composite PMI Output Index dipped from 53.8 in February to a six-month low of 52.7 in March.

The latest figure pointed to a slower upturn in private sector output and rounded off a weaker quarterly performance than registered in Q3 FY18.

The rate of expansion in new business placed with services companies eased since February.

Firms commented that successful marketing efforts and greater demand underpinned the rise in sales, but some noted that an increasingly competitive environment acted as a brake on growth.

With factory orders also displaying a slower upturn, sales at the aggregate level rose at the weakest pace since last September.

International trade supported rises in new business at manufacturing and services companies.

Among the latter, the increase in export sales in March was the second in the past five months.

Across the private sector, growth of new work from abroad picked up to a four-month high.

There was a further rise in backlogs of work, which service providers continued to link to difficulties in obtaining outstanding payment from clients.

The pace of increase was the second-fastest since October 2017.

Although unfinished work among goods producers rose, the rate of accumulation moderated to the joint-weakest in the current fivemonth sequence of growth.

Latest data indicated only a slight rise in service sector employment, with the rate of job creation the slowest in six months.

Almost 94% of firms left headcounts unchanged amid sufficient employee numbers to handle current workloads.

Growth of manufacturing jobs also eased, translating into the weakest upturn in private sector employment for 19 months.

Business sentiment among service providers strengthened to a six-month high.

Predictions of greater inbound tourism, marketing efforts and wider product offerings boosted confidence in March.

By comparison, manufacturing optimism improved to the strongest in seven months.

Efforts to alleviate pressures on margins underpinned a further increase in services fees.

The rate of charge inflation accelerated slightly, but remained below its long-run average.

In contrast, a softer rise in factory gate prices was recorded.


 

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