Services Sector PMI Declines To 52.2 Due to Weak Demand Growth

Services sector in the country witnesses weakened growth for the second consecutive month in January. For the month of January, the Nikkei IHS Markit Services Purchasing Managers' Index came in at a 3-month low of 52.2 in comparison to 53.2 recorded for the month of December.

Nonetheless, firms remained upbeat with their hiring plan with increase in staffing level at the fastest rate in 3 months despite a decline in demand. This is primarily owing to expectations that business activity will pick up post elections and possibly resilience in manufacturing activity can be seen.

The mark of 50 separates growth from contraction.

"There is some sign that growth may run out of steam, in the short-term at least, as seen by the weakest improvement in demand for four months and relatively subdued optimism," said Pollyanna De Lima, principal economist at IHS Markit.

"Should data for services carry on a downward path, we could see a slowdown in GDP expansion in the final quarter of fiscal year 2018."

Furthermore, the pick-up in foreign sales has been offset by weak growth in demand in the domestic markets.

Also, with uncertainty around the likely outcome of general assembly election due in May, outlook on future activity has been dragged down to a 3-month low.

"The good news came from the Indian labour market. Job creation at service providers was among the strongest seen for the past seven-and-a-half years at the start of 2019," added De Lima.

"The increasing willingness of companies to hire workers should help reduce still high levels of unemployment in the country."

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