Services expand at fastest pace in 11 yrs, finds survey

NEW DELHI: India’s key services sector expands at fastest pace in 11 years as demand conditions pick up but price pressures continue to cause concern, a survey showed on Tuesday .
Up from 58.9 in May to 59.2 in June, S&P . Global India Services PMI The business activity index was at its highest level since April 2011 and signals a strong pace of growth. The wide-ranging growth rate increase across the four sub-sectors is tracked. According to the panelists, the uptrend stems from the continued improvement in demand following the withdrawal of pandemic restrictions, capacity expansion and a favorable economic environment. The survey was compiled from responses to questionnaires sent to a panel of about 400 companies in the service sector.
Although companies expect the recovery to be sustained for 12 months, concerns around price pressures have limited business confidence. Input costs continued to rise at a historically high rate, although this was the slowest in three months, while fee inflation hit a nearly five-year high, according to the survey. Key service sectors have been hit hard by the Covid-19 pandemic wave as restrictive measures in place to prevent the spread of the deadly virus have closed shopping malls, many hotelsrestaurants and hurt travel and tourism.
“Consumer services posted the strongest gains in both output and new orders in June, but growth accelerated across the board. Cost pressures in the services economy remained high in June, despite falling to a three-month low.With companies still holding substantial electricity prices, driven by strong demand conditions, output fee inflation has risen to a near 5-year high, ” Pollyanna De LimaVice President of Economics at S&P Global Market Intelligence.

Take over

Services firms recorded a significant increase in new jobs at the end of the first fiscal quarter, with the growth rate improving at the best rate in more than 11 years.
Companies were able to secure new orders despite charging more for their services. June data showed selling prices rose the fastest since July 2017 as some companies looked to pass some of the additional cost burden on to customers.
Inflation continues to make businesses worried.
“The soaring services PMI corroborates our view that the service sector will lead the growth recovery in FY2023. Middle to high income households are likely to prioritize spending on high exposure services, which have been avoided during the pandemic, at the expense of consumers, which could lead to slower capacity utilization improvements, modestly delaying plans private sector investment plans amid global difficulties and rising commodity prices,” Aditi Nayarchief economist at rating agency ICRA.

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