economy

India services PMI remains elevated in November, but Omicron concerns prevail

India services PMI remains elevated in November, but Omicron concerns prevail

India’s services activity remained elevated in November, but dropped marginally from October when it had registered the strongest growth in ten and-a-half years, a private survey said. However, international travel restrictions by many countries due to the spread of the new coronavirus variant, Omicron, may hit services activity in the coming months. Data released by IHS Markit showed that Purchasing Managers’ Index (PMI) for services eased to 58.1 in November from 58.4 in October. A reading above 50 indicates expansion in economic activity. “PMI data for November indicated that the Indian service sector continued to strengthen, with a substantial upturn in new orders underpinning output growth. According to monitored companies, the upturn reflected sustained increases in new work and ongoing improvements in market conditions, the data analytics firm said. IHS Markit said although business confidence improved to a three-month high in November, the overall level of positive sentiment was well below its long-run average. “Some companies expect demand to continue to trend higher, but several others were worried that elevated inflation could dampen the recovery. Input costs rose at the second-strongest pace in close to ten years, while the rate of charge inflation softened from Octobers recent high. While a few firms transferred higher input costs through to their clients by lifting selling prices, the vast majority kept their fees unchanged from October, it added. Amid reports of higher fuel, labour, material, retail and transportation costs, average input prices among Indian services companies rose further in November. The overall rate of inflation quickened from October and was the second-strongest in almost a decade, behind April, IHS Markit said. However, Omicron variant remains a major concern. “The covid-19 pandemic and travel restrictions reportedly caused a further drop in international demand for Indian services. The latest fall in external sales was the twenty-first in successive months, although among the slowest over this period, the data analytics firm said. Pollyanna De Lima, economics associate director at IHS Markit said the recovery of the Indian service sector was extended to November, with a robust improvement in sales enabling the second-fastest rise in business activity in nearly ten-and-a-half years. “Companies were somewhat convinced that output levels would continue to increase in the year ahead, but worries regarding inflationary pressures weighed on confidence again. Not only did services firms see their expenses increase further in November, but also to one of the greatest extents in a decade. Looking at the manufacturing and service sectors combined, the results are even more encouraging and bode well for economic performance in the third quarter of fiscal year 2021/22 so far. With production growth quickening considerably in November, private sector output expanded at the fastest pace since January 2012, she added. Data released on Tuesday showed Purchasing Managers’ Index (PMI) for manufacturing grew at its fastest pace in 10 months to 57.6 in November, as companies scaled up input buying encouraged by strengthening demand and improving market conditions, which in turn led to the second-quickest accumulation in stocks of purchases since data collection started nearly 17 years ago, a private survey showed. Download.

economy 2021-12-03 Livemint