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Informist, Friday, Oct. 4, 2024

 

--India Sep services PMI 57.7 vs 60.9 in Aug

--India Sep composite PMI 58.3 vs 60.7 in Aug

 

NEW DELHI – In September, India's services sector expanded at the weakest pace in 10 months, with the HSBC Purchasing Managers' Index falling to 57.7 from 60.9 in August, data released by S&P Global on Friday showed. This is the first time in 2024 that the services PMI has come in below 60. A PMI reading of more than 50 denotes expansion in activity, while a sub-50 print is indicative of contraction.

 

According to Pranjul Bhandari, HSBC's chief India economist, a services PMI of 57.7 is "still much above the long-term average".

 

The September services PMI is not just well below the August figure, but also lower than the flash estimate of 58.9, released on Sept. 23.

 

"Growth was reportedly curbed by fierce competition, cost pressures and changes in consumer preference (i.e., switch to online services)," S&P Global said in a statement Friday, adding that while new business orders rose "sharply" in September, the rate of increase was the lowest in 10 months. Within overall orders, the growth in new export orders was the lowest in 2024.

 

In what will be music to the Reserve Bank of India's ears, prices charged by service providers in September rose at the weakest pace in more than two and a half years due to "fierce" competition. The central bank's Monetary Policy Committee is set to begin its three-day meeting on Monday. And while headline retail inflation has been below the RBI's medium-term target of 4% for the last two months, economists see it rebounding to around 5% in September on the back of an unfavourable base effect.

 

The Indian central bank has left the policy repo rate unchanged at 6.50% since February 2023 as it waited for its 250 basis points worth of rate hikes spread over 2022-23 (Apr-Mar) to take effect and bring down elevated prices. However, with inflation trending lower and signs of growth softening, according to some experts, markets believe a rate cut is not too far away. Meanwhile, the RBI has been steadfast in its focus on inflation.

 

"We have to remain watchful of how the forces impacting inflation play out. The balance between inflation and growth is well poised. We must successfully navigate the last mile of disinflation, and preserve the credibility of the flexible inflation targeting framework which is a major structural reform. The best contribution that monetary policy can make for sustainable growth is to maintain price stability," RBI Governor Shaktikanta Das said on Sept. 20 in a speech at the FIBAC banking conference in Mumbai.

 

On the employment front, S&P Global said Friday the "solid increase" in jobs the services sector has seen since May continued in September. Bhandari noted that demand for labour has been strong due to a "long period of robust new business growth".

 

The services PMI number comes after data released on Tuesday showed the manufacturing index also fell sharply in September, coming in at 56.5 – the joint-lowest in 2024. This meant the composite PMI, released Friday, also fell to a 10-month low of 58.3 from 60.7 in August.  End

 

Reported by Siddharth Upasani 

Edited by Avishek Dutta

 

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