India’s services PMI ends 2023 on a high note; rises to 59.0 in Dec from 56.9 in Nov

India’s services sector ended 2023 on a high with activity expanding the fastest in three months in December. HSBC India Services Purchasing Managers' Index compiled by S&P Global, rose to 59.0 in December from November's one-year low of 56.9, on the back of strong demand that spurred sales and fuelling business activity. Job creation extended into the 19th successive month, while business optimism strengthened. 

Cost pressures have declined significantly, reaching a near three-and-a-half-year low, S&P said. Nevertheless, there has been a notable and robust increase in selling charges. The December PMI indicated a significant output increase, the highest since September. Despite lower figures in October and November, the latest quarterly average marked the lowest since the Q4 of the fiscal year 2022-2023.

Favourable economic conditions and positive demand trends were the key drivers of output growth. New business intakes not only increased in December but also reached their highest point in three months. The rise in total new business was bolstered by the continued growth of international sales. However, the rate of expansion in new export orders, which had been easing since November, was modest and the least vigorous since June.

Indian service companies anticipate the robust demand to continue into 2024, bolstered by advertising and enhanced customer relationships, leading to optimistic output forecasts. The overall business optimism was stronger than the sentiment recorded in November. HSBC's PMI data revealed persistent job creation in India's service sector. Survey respondents reported hiring new employees on both full-time and part-time basis. Despite being moderate, the overall employment growth rate surpassed that of November.

December data indicated a slight strain on the capacity of Indian service companies as outstanding business experienced a marginal rise. The rate of accumulation was the fastest in four months, matching its long-term average. With reports of increased food prices and other inputs, the average cost of service firms continued to rise by the end of the third fiscal quarter. 

However, the overall inflation rate was modest, below its long-term average and the weakest in nearly three-and-a-half years. Despite this, there was a minor increase in charge inflation in December. 

The rate of price increase for service provision in India was substantial, above its long-term average and faster than that seen for input costs. This was reportedly due to firms increasingly passing on cost burdens to their customers.

Also read: Services PMI falls to 58.4 in October from 61.0 in September: S&P Global India

Also read: India's manufacturing PMI slows in September marginally despite increased inflationary pressures: S&P Global