With the lifting of Covid lockdown restrictions, India's service sector is booming, with the manufacturing sector doing well too. India’s services sector saw a sharp hike in August due to stronger gains in new businesses, ongoing improvements in demand conditions and job creation. The seasonally-adjusted S&P Global India Services PMI Business Activity Index rose from a four-month low of 55.5 in July to 57.2 in August, amid a quicker increase in business activity and the sharpest rise in employment in over 14 years.
PMI, which stands for Purchasing Managers' Index, is an economic indicator, which is derived after monthly surveys of different companies. The index shows trends in both the manufacturing and services sector.
Simply put, the jargon means a sharp increase in the number of jobs and more transactions by businesses. And this is not exceptional but has now become a trend, belying the opposition claims of widespread unemployment. This is the 13th straight month of expansion for the services sector.
The latest PMI print is even better because it adds to the Q1 GDP data that show an uptick in contact-intensive services, including “trade hotels, restaurants, etc”, and public administration. The momentum seems to be have been largely maintained since then.
The manufacturing sector activity last month had reported the second-strongest improvement in operating conditions in nine months, indicating continued economic momentum and strong business confidence, according to the S&P Global India PMI. The index was a little different from July’s reading of 56.4, posting 56.2 in August. Firms were at their most optimistic for six years, it said.
Pollyanna De Lima, the economics associate director at S&P Global Market Intelligence, read the situation as: “The pick-up in growth stemmed from a rebound in new business gains as firms continued to benefit from the lifting of Covid-19 restrictions and ongoing marketing efforts.”
Forecasts about the year-ahead outlook for output were revised higher, with optimism at its greatest degree since May 2018. “Services companies expect output growth over the coming 12 months, with sentiment rising to its highest level in over four years. Optimism was centred on forecasts of ongoing improvements in demand and planned marketing,” the report said.
As for jobs, the combination of strong sales and upbeat growth projections underpinned a substantial increase in payroll numbers across the service sector. “While the rate of charge inflation was broadly similar to July, there was a considerably softer upturn in input costs. The latter rose at the weakest pace in close to a year,” Lima said.
Meanwhile, the S&P Global India Composite PMI Output Index, which measures combined services and manufacturing output, rose from 56.6 in July to 58.2 in August, indicating a sharp pace of expansion.
New work intakes increased at quicker rates in the manufacturing and service sectors, leading to the fastest upturn at the composite level for nine months.