Services growth eased in March: S&P Global PMI

India’s Services sector growth lost some momentum in March 2023 even as input cost inflation dropped to a 30-month low. Firms passed on higher costs to clients at a pace that was the highest in three months.

India’s Services sectors lost some growth momentum in March, even as new orders and output continued to rise for the 20th straight month as per the S&P Global India Services Purchasing Managers’ Index (PMI), which dropped from 59.4 in February to 57.8 in March. A reading of over 50 on the PMI indicates growth in activity.

Although input cost inflation dropped to their lowest level since September 2020, firms reported higher expenses on account of rising food, fuel, transportation and wage costs. New hiring was fractional, with almost 98% of firms leaving their payroll numbers unchanged from February levels.

Companies reported an uptick in international orders even as their overall order books grew at a softer pace in March than February. Services providers also passed on higher cost burdens to clients by raising selling prices at a three-month high pace.

On average, services firms were optimistic about business volumes rising a year ahead, but the overall level of positive sentiment fell to an eight-month low as several firms foresee no change in activity from present levels.

“As has been the case for three successive months, all four broad areas of the service economy registered growth of new business and output. Consumer Services topped the rankings again on both fronts, while the slowest increases were seen in Real Estate & Business Services,” S&P Global said in a note.

While Services players reported further increases in new business intakes and output, Manufacturing has retaken the mantle as the main driver of growth, reckoned Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

The S&P Global Composite PMI, which combines services and manufacturing sectors’ metrics, eased to 58.4 in March from 59 in February, reflecting a slower increase in services activity and quicker growth of manufacturing production.