Purchasing managers’ index falls to four-month low in July to 55.5

India’s services sector #PMI (#purchasingmanagers index) fell to a 4-month low in July 2022 to 55.5 due to weaker sales growth and #inflation.

The services PMI had climbed to an 11-year high in June at 59.2. S&P Global, the publisher of one of the most-observed private surveys by economists and policy-makers, said that the retrieval of the Indian service sector lost momentum during July as weaker sales growth and inflationary pressures limited the most delinquent upturn in business activity with rising inflation.

It further said that while marketing efforts underpinned another rise in new work intakes, competitive pressures and adverse weather doused demand. “That said, the weaker recovery was supplemented by retreating price pressures. Input costs increased at the slowest rate since February, while output charges were hiked to a weaker extent than in June,” the survey said.

Business sentiment in the service economy was suppressed in July, the survey said. Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said that there were many positives in the latest results and business activity continued to rise strongly, with a similarly robust uplift in new business as the offering of new services and marketing efforts bore fruit. “There was, however, a noticeable loss of momentum for the Indian service economy as demand was somewhat curtailed by competitive pressures, elevated inflation and unfavourable weather. Both output and sales increased at the weakest rates for four months,” De Lima said.

Service providers that reported higher sales mentioned favourable demand conditions and fruitful advertising. Growth was dampened by fierce competition and unfavourable weather, according to survey participants. “Underlying data indicated that the domestic market remained the key source of sales growth as international demand for Indian services worsened further. The latest drop in new international business was marked, but the weakest in six months,” S&P Global said.

The July survey data showed a negligible increase in service sector employment across India. Further, 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.

As per the survey, 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.