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India's services sector output contracts moderately: HSBC PMI

India's services sector output contracts moderately: HSBC PM
India's HSBC Services Business Activity Index rose from September's four-and-a-half year low of 44.6 to 47.1 in October.

The latest reading indicated a fourth successive monthly contraction of service sector output across India and is cretainly not good news.

"Sector data indicated that business activity fell in five of the six categories monitored by the survey, with the sharpest decline noted at Hotels & Restaurants. Lower levels of private sector output mirrored a further decrease in new business flows. As with the trend for activity, incoming new work contracted at a slower rate in services, but quickened in manufacturing. Anecdotal evidence indicated that worsening client confidence, economic instability, competitive pressures and the cyclone Phailin had all contributed to the latest drop in new work. For the second successive month, all six service sub-sectors posted lower new business volumes. The fastest decline was noted at Hotels & Restaurants," an HSBC PMI release has stated.

Whereas employment in the manufacturing sector rose slightly, service providers indicated little change in their payroll numbers during October. Consequently, the rise in staffing levels across the Indian private sector as a whole was only marginal. Four of the six monitored service categories posted job shedding, the exceptions being Renting & Business Activities and ‘Other Services'.

Commenting on the India Services PMI survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said:

"The continued contraction in service sector activity is testament to the dampening effects of the heightened macroeconomic uncertainty, which is making businesses and consumers more cautious about spending. While activity readings may be stabilizing, a notable recovery is not in the cards for a while still. Despite the weak growth backdrop, the RBI has to keep its inflation guards up to address the lingering inflation pressures."

Story first published: Tuesday, November 5, 2013, 12:27 [IST]
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