05 Jun 2017 13:05 IST

Services sector PMI jumps to four-month high of 52.2 in May

Nikkei India Composite PMI Output Index hits 7-month high of 52.5

The country's services sector activity increased at its fastest pace in four months in May led by a faster rise in new business inflows, according to a private monthly survey.

The Nikkei India Services PMI Business Activity Index rose to 52.2 in May from 50.2 in April, which was the fastest increase in output in the current four-month sequence of expansion.

“The headline number was, however, indicative of a moderate pace of growth that was below the series average (54.8),” it said in a release.

A reading over 50 denotes expansion while one less than it indicates contraction in production.

The Nikkei India Composite PMI Output Index also reached a seven-month high of 52.5 in May from 51.3 in April.

The Nikkei Markit India Manufacturing Purchasing Managers’ Index (PMI) had slumped to a three-month low of 51.6 in May.

The data comes just ahead of the second bi-monthly monetary policy on June 6 and 7.

The Reserve Bank of India in its last monetary policy review meet on April 6 had maintained the repo rate at 6.25 per cent, but increased the reverse repo rate to 6 per cent from 5.75 per cent.

“The pick-up in services sector growth seen mid-way through the first quarter suggests that GDP could expand at a faster rate should growth momentum be maintained in June, though there are downside perils to this,” said Pollyanna De Lima, economist at IHS Markit, and author of the report, adding that concerns over low growth might prompt the RBI to lower the benchmark rate in order to support the economy.

According to the survey, post and telecommunications sector was a “bright spot” in May, with expansion rates for both activity and new businesses surpassing those seen in financial intermediation and ‘other services’. However, output and new work fell elsewhere.

The higher growth in activity was led by more business inflows based on higher demand. Businesses also hired additional staff to meet the orders.

Though input costs increased, the rate of inflation was negligible. But business sentiment weakened on the back of growing concerns regarding competitive pressures.

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