India’s services sector shrank the most last month since July 2020, with the survey-based IHS Markit Purchasing Managers Index (PMI) for services at 41.2, reflecting a second successive monthly contraction in new business and increased job shedding by firms.
International demand for Indian services deteriorated further with new export orders falling for the sixteenth straight month. The sharp contraction in the June Services PMI, followed May’s 46.4. A reading above 50 denotes expansion and one below it signifies a contraction in business activity.
“Business activity and new orders decreased in four out of the five broad areas of the service economy, with the fastest rates of contraction registered in consumer services,” IHS Markit said in a statement. “Transport and storage was the only segment to post growth,” the firm added.
Jobs fell in tandem with new orders. “The fall in employment was the seventh in consecutive months and the fastest over this period. The decline in jobs was widespread across the five monitored sub-sectors, and led by consumer services,” it noted.
“The overall level of business sentiment was down for the third month in a row in June, reaching its lowest mark since last August,” IHS Markit added, with the COVID-19 pandemic seen as the main threat to the outlook.
Uncertainty weighs
“Uncertainty about the path of the pandemic restricted business confidence among services firms, who were generally neutral in their forecasts for output in the year ahead,” said Pollyanna De Lima, Economics Associate Director at IHS Markit.
June’s manufacturing PMI had earlier slid to 48.4, and with services activity also retreating, the Composite PMI Output Index declined from 48.1 in May to 43.1 in June, again registering the sharpest contraction since July 2020.
“Aggregate employment continued to contract, stretching the current sequence of job shedding to 16 months. The pace of reduction was moderate, although the quickest since October 2020,” IHS Markit said.