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

India’s services sector activity grew at the slowest pace in the last seven months in October, a survey showed on Friday. The S&P Global India Services Purchasing Managers' Index (PMI) fell to 58.4 last month from September's 61.0, which was lower than what the Reuters poll had expected -- 60.5.

The Services PMI shows advanced insights in the services sector helping investors with the business conditions and economic backdrop. October data highlighted the second-fastest upturn in international orders placed with Indian services companies since the series started in September 2014. 

The survey said the growth was underpinned by the securing of new work, favourable demand trends and positive market conditions.

"At 58.4 in October, the seasonally adjusted S&P Global India Services PMI Business Activity Index indicated a substantial upturn in output. This was despite the headline figure falling from 61.0 in September and signalling the slowest rate of expansion since March," the survey noted.

Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, noted: "The Indian service economy continued to register impressive growth, despite the increases in business activity and new work intakes softening from September's over 13-year highs. Several companies managed to secure new contracts, but some mentioned subdued demand for their services and competitive conditions."

The survey noted there were faster increases in input costs and output charges in October, with rates of inflation outpacing their respective long-run averages.

Pollyanna said: "Inflationary forces in the Indian service sector intensified, primarily as a result of surging food, fuel and staff costs. Although survey participants passed these additional cost burdens on to clients, permitted by demand strength, the rise in charges could have been the trigger of the deceleration in sales growth. Moreover, a pick-up in inflation expectations in October dampened business confidence."

The survey noted that there is "fierce competition and subdued demand for certain types of services," which has negatively affected the business's prospects for the next year. This was reflected by a drop in the future activity sub-index from its nine-year high in September to 63.5. Additionally, employment growth decreased to its lowest level in three months.

A month ago, India’s services sector activity gained momentum in September and PMI moved up to 61 from 60.1 in August.