Services PMI slips to 58.1 in Feb on inflation pressures

India's services sector growth moderated slightly in February as new order growth slowed to a 13-month low amid slower improvement in demand and a pick-up in inflation, a monthly survey said on Wednesday.

The seasonally adjusted HSBC India Services PMI Business Activity Index eased to 58.1 in February from 58.5 in January. In PMI parlance, a print above 50 indicates expansion. “India's Services PMI registered 58.1 in February, largely unchanged from January’s 58.5, signalling another month of robust expansion,” said Pranjul Bhandari, Chief India Economist at HSBC. She noted that while new order growth slowed to a 13-month low amid rising competition, international sales picked up and firms increased hiring to meet operational needs.

Panel members said greater client enquiries and marketing efforts supported sales at some firms, while an increasingly competitive environment dampened growth at others. Exports outperformed, with service providers reporting gains from Canada, Germany, mainland China, Singapore, the UAE, the UK and the US. International sales expanded at the fastest pace since August.

On the price front, February saw the sharpest rise in operating expenses in two-and-a-half years. Firms raised prices charged for services to the greatest extent in six months, passing on higher costs, particularly food and labour.

Despite cost pressures, business confidence rose to a one-year high as companies looked to broaden market presence. Meanwhile, overall private sector activity strengthened. The HSBC India Composite PMI Output Index rose to 58.9 in February from 58.4 in January, the fastest pace in three months, driven by strong manufacturing momentum. Job creation accelerated to its strongest since last October, while both input costs and output charges rose at faster rates. The Services PMI is compiled by S&P Global.