FX.co ★ India Services Growth Softens To 5-Month Low

India's service sector continued to show strong growth in May, albeit at the slowest pace in five months, according to the latest survey from S&P Global released on Wednesday. This moderation was largely attributed to price pressures and an intense heatwave.

The seasonally adjusted HSBC Services Purchasing Managers' Index (PMI) fell to 60.2 in May from 60.8 in April. While this represents a decline, any score above 50 still indicates expansion. The preliminary figure for May was 61.4.

New orders saw their slowest growth rate of the year due to intense competition and extreme weather conditions across the country. Despite this, the overall expansion was underpinned by favorable economic conditions and demand, as well as successful advertising campaigns.

On a more positive note, export orders surged at the fastest rate since the survey began in September 2014, with Indian service providers experiencing robust demand from Asia, Africa, Europe, the Middle East, and the US.

Staffing levels were boosted to their highest since August 2022 as firms ramped up their workforce.

Cost pressures increased in May, driven by higher prices for materials such as meat, packaging, and vegetables, alongside rising labor costs.

Looking forward, business confidence among Indian service companies remained optimistic. The positive outlook was driven by expectations that marketing efforts would be fruitful, along with improved customer engagement, solid demand, and strong economic conditions.

The Composite Output Index, which measures the combined output of both the manufacturing and service sectors, dropped to 60.5 in May from 61.5 in April. This marked the slowest expansion rate in the Indian private sector since December of the previous year.