India services sector output falls in January

India services sector output falls in January

India's services sector output was recorded at 51.5 in January, a significant dip from December's 55.5. The headline figure pointed to the slowest expansion in the current six month period, according to the report by IHS Markit. In January, the composite PMI output fell from 56.4 in December to 53.0, the slowest expansion rate in the current six month period.

The escalation of curfews and the reintroduction of curfews had a negative impact on growth across the service sector. New business and output went up at a slight rate that was the weakest in six months. Concerns about how long the current wave of COVID-19 will last dampened business confidence and resulted in job shedding. Pollyanna De Lima, Economics Associate Director at IHS Markit said firms were alarmed about price pressures.

Growth in new businesses and output was hampered by the escalation of the epidemic. A job shedding and business confidence took a hit last month. The rate of input cost inflation went to the highest level in over 10 years after seeing a decline in December. Output charges rose at a moderate pace but were faster than in December.

At the beginning of the year, the growth rate was slight and weakest in six months. The report said demand was restricted due to the increase in COVID 19 cases. Business sentiment remained positive, but fell to a six month low, it said.

Inflation was the highest since December 2011 for service providers. Many companies said additional cost burdens were transferred to customers.

The service sector jobs declined for the second month running in January, due to reduced output requirements among some businesses and future uncertainty, said IHS Markit. There was an increase in outstanding business among firms, as indicated by this. The backlog accumulation was only small.

New export business fell at a moderate pace because of travel restrictions that curbed international demand for Indian services.

Business activity growth across the Indian private sector was sustained at the beginning of the year, but lost some momentum. The Composite PMI Output Index fell from 56.4 in December to 53.0 in January, signalling the slowest expansion rate in the current six month period. The report said that both services activity and manufacturing production increased at a slower rate.

The rate of expansion for private sector companies fell to the slowest in six months, as new orders continued to rise.

Employment in the private sector fell for the second consecutive month. In December, job shedding accelerated and input cost inflation increased in January.

The report stated that private sector firms' prices went up at a faster rate in January, although the report stated that it was moderate and in line with its long-run average.