India’s service sector PMI slows to 51.5, composite PMI to 53 in Jan

India’s services sector output was recorded at 51.5 in January, a significant dip from December’s 55.5. IHS Markit in its report stated that the headline figure pointed to the slowest expansion in the current six-month sequence of growth. Meanwhile, the composite PMI output fell from 56.4 in December to 53.0 in January, the slowest rate of expansion in the current six-month period of growth.

"The escalation of the pandemic and reintroduction of curfews had a detrimental impact on growth across the service sector. Both new business and output rose at slight rates that were the weakest in six months. Concerns about how long the current wave of COVID-19 will last dampened business confidence and caused job shedding. Firms were also alarmed about price pressures,” said Pollyanna De Lima, Economics Associate Director at IHS Markit.

Services Sector Output

Growth in new businesses and output was curbed by the escalation of the pandemic. Job shedding continued and business confidence took a hit last month. After seeing a decline in December, rate of input cost inflation surged to the highest in over 10 years. Output charges rose at a moderate pace but was faster than in December. 

New work intakes increased further at the start of the year, but the rate of growth was slight and weakest in six months. Demand was restricted due to the increase in COVID-19 cases, the report added. “Business sentiment remained positive, but slipped to a six- month low,” it said.

The overall rate of inflation climbed to its highest since December 2011 for service providers. Many companies said that additional cost burdens were transferred to customers.

“Service sector jobs declined for the second month running during January, owing to reduced output requirements among some businesses and future uncertainty,” stated IHS Markit. This indicated that there was an increase in outstanding business among firms. The backlog accumulation, however, was only slight. 

While travel restrictions curbed international demand for Indian services, new export business fell only at a moderate pace.

Composite PMI

“Business activity growth across the Indian private sector was sustained at the start of the year, but lost considerable momentum. The Composite PMI Output Index fell from 56.4 in December to 53.0 in January, signalling the slowest rate of expansion in the current six-month period of growth. Both services activity and manufacturing production increased at weaker rates,” stated the report.

While new orders continued to rise, rate of expansion eased to the slowest in six months for private sector companies.

Private sector employment fell for the second successive month. Job shedding accelerated from December, and input cost inflation gathered pace in January. 

“Prices charged by private sector firms likewise increased at a quicker rate in January, albeit one that was moderate and in line with its long-run average,” the report stated.

Also read: India’s manufacturing PMI falls to four-month low in Jan at 54