Nikkei India Services PMI®
Job creation strengthens amid sustained rise in new work
* Service sector employment increases at secondfastest pace since last April despite softer growth of activity and new business
* Business sentiment at three-month high
Data collected December 5-19
India’s service economy expanded further at the end of 2018, as strengthening demand continued to translate into new business gains. Although growth of new work and activity moderated from November’s recent high, companies hired additional workers to a greater extent. Supporting the uptick in job creation was an improvement in business sentiment and easing cost inflationary pressures. Expenses rose at the weakest pace in over one-and-a-half years.
Despite falling to 53.2 in December, from 53.7 midquarter, the seasonally adjusted Nikkei India Services Business Activity Index pointed to an expansion in sector output that was among the strongest recorded in the past two years. The figure contributed to the highest quarterly average seen since Q4 FY 2015/16. Information & Communication remained the strongest performing category, posting the quickest increases in both new business and activity. Real Estate & Business Services was the only segment to record contractions.
The slowdown in growth of services activity was accompanied by a softer increase in manufacturing production, leading to a weaker rise in private sector output. The seasonally adjusted Nikkei India Composite PMI Output Index was down from a 25-month high of 54.5 in November to 53.6 at the end of the year.
Growth of services activity stemmed from ongoing increases in new business. Sales expanded at a slower pace than registered mid-quarter, but one that was among the strongest recorded in the past one-and-a-half years. At the same time, the upturn in factory orders held close to November’s 11- month high.
Service sector data suggested that the upturn in total new business was domestically driven as new export work was broadly unchanged, following a reduction in the prior month. Conversely, manufacturers benefited from greater sales to external markets.
Whereas services firms took on extra staff, outstanding business rose further. But with employment growth accelerating to the secondquickest pace seen since last April, the accumulation in backlogs eased to the weakest in five months. On the other hand, a slower expansion in manufacturing jobs was noted, while work-in hand increased to a greater extent.
Prices charged for the provision of services in India rose again at the year-end, as firms sought to share additional cost burdens with their clients. Despite being the highest in three months, the rate of output price inflation was marginal. Factory gate charges meanwhile was little-changed, ending a 16-month period of increases.
Cost inflation at services firms softened for the third straight month to the weakest since May 2017. With purchasing prices in the manufacturing industry increasing at a slower pace, aggregate cost inflation eased to the weakest in over two years.
Advertising efforts, new service offerings and predictions of an improvement in market conditions after the elections all boosted business sentiment regarding the 12-month outlook for activity. Furthermore, the level of confidence was the highest seen in three months. By comparison, optimism among goods producers moderated from mid-quarter.