Services PMI Expands At The Slowest Pace In Over Two Years

After ending 2024 on a strong footing, service providers in India recorded a loss of growth momentum in January, according to the latest HSBC PMI release.

At 56.5 in January, the seasonally adjusted HSBC India Services PMI Business Activity Index indicated a sharp rate of expansion. However, the headline figure was down from 59.3 in December to its lowest level since November 2022. The HSBC India Composite Output Index fell from 59.2 in December to a 14-month low of 57.7.

Several services companies linked output growth to favourable demand conditions, new business wins and investment in technology. However, a few firms suggested that activity levels at their units were constrained by a fall in customer numbers.

Overall, new business continued to increase strongly, but the rate of expansion softened to the weakest in 14 months. The rise was attributed to strong demand and decisions to offer better prices than rivals. Growth was reportedly curbed by intense competition.

In contrast to the trend for total new orders, there was a quicker increase in international sales. Survey participants noted gains from clients in Asia, Europe, the Middle East and the Americas.

The overall rate of expansion hit a five-month high. Ongoing improvements in new business intakes and rising capacity pressures prompted service providers to recruit additional staff at the start of the last fiscal quarter. The rate of job creation accelerated from December and was among the fastest seen since data collection started in December 2005.

Service providers in India were confident of a rise in business activity over the course of the coming 12 months. Qualitative data showed that advertising, efforts to price competitively and new client enquiries were some of the reasons listed for upbeat forecasts. The level of positive sentiment did fall to a three-month low, but was broadly aligned with the series trend.

The rate of inflation was little-changed from that seen around the turn of the year, therefore remaining above its long-run average. As a result of rising cost burdens and demand resilience, prices charged for the provision of Indian services increased further at the start of 2025. Having accelerated from December, the rate of charge inflation was marked and above its trend.