Economy: Services PMI jumps to 62.3 in July, the highest in over 13 years

Virendra Pandit

New Delhi: India’s services activity shot up sharply from a Purchasing Managers’ Index (PMI) of 58.5 in June to 62.3 in July, a report from the S&P Global Market Intelligence said on Thursday.

At 62.3, the July services PMI is the highest point in over 13 years, vis-à-vis the last time’s peak in June 2010. It also stayed above the key level of 50 that separates expansion in activity from a contraction for 24 months in a row, the media reports, quoting S&P data, said.

The PMI is an important indicator based on the surveyed responses of nearly 400 service companies, covering sectors like non-retail consumer services, transport, information, communication, finance, insurance, real estate, and business services. An index is calculated for each of these key sectors, which are then combined to give an overall PMI outlook.

Since the PMI measures change every month and is seasonally adjusted, it is viewed as a good indicator of the momentum in economic activity. Also, unlike the official figures, it is the instantly available data point. The PMIs for the bygone month for the services and manufacturing sectors are released in the first week of the current month.

The latest services PMI data came two days after S&P Global said the manufacturing PMI eased a little from 57.8 in June to 57.7 in July. Because of this positive change in the services PMI, the composite PMI increased from 59.4 in June to 61.9 in July.

This upturn in the services PMI in July was because of stronger demand conditions and new orders. The increase in demand for Indian services in July was the most in over 13 years during July, with 29 percent of respondents reporting higher intakes of new business.

International orders also picked up and posted the second-highest increase since the series started in September 2014, with demand growing the most in Bangladesh, Nepal, Sri Lanka, and the United Arab Emirates.

“The broad increases in sales across the domestic and international markets are particularly welcoming news, especially in light of the challenging global economic scenario,” Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said.

Although pressure on service providers’ capacities increased only slightly in July, the survey showed staff hiring continued at a pace “broadly similar” to that in May and June.

But higher prices could be a dampener. In July, service providers’ input costs rose at the fastest pace in 13 months, particularly in food, labor, and transportation costs.

While prices charged to customers also increased, they rose at the slowest rate in three months.

“Anecdotal evidence highlighted cautious pricing strategies among survey members, owing to efforts aimed at preventing any negative impact on new business,” S&P Global said.

The sharpest increase in input costs was seen in consumer services, while real estate and business services witnessed the highest hike in prices charged to customers.

The Reserve Bank of India (RBI), which will announce its next interest rate decision on August 10, has left the policy repo rate unchanged at 6.5 percent so far in the current financial year (2023-24).