India Services PMI Ticked Up In July But Remains Weak

A gauge of India's services sector indicated some improvement in activity as the nation eased certain restrictions imposed to contain the coronavirus pandemic.

The India Services Business Activity Index, compiled by IHS Markit, stood at 34.2 in July compared with 33.7 in June, according to a media statement. A reading below 50, however, indicates contraction in business activity. The latest reading remains close to the lowest recorded in nearly 15 years of data collection, surpassed only by the unprecedented falls in the previous three months, the release said.

The India Manufacturing Purchasing Managers Index, released on Monday, stood at 46 in July compared with 47.2 in June.

Frequent mentions of lockdown measures, weak demand conditions and the temporary suspension of company operations continued to weigh on activity, according to survey respondents.

While new businesses declined for a fifth straight month, the decline in export orders was even steeper. However, the level of outstanding business rose, with the rate of expansion the quickest since October 2017. With capacity being restricted, firms struggled to process even existing backlogs in July.

Input costs increased for the first time since March amid reports of greater fuel and cargo costs, alongside higher fees charged by suppliers. However, fierce competition for the relatively little new work available continued to put downward pressure on selling prices, the release said. Average charges levied by Indian services firms fell for the fourth consecutive month, with the rate of deflation accelerating to a solid pace.

With overall demand conditions severely muted, service providers made further job cuts in July. The rate of job shedding was the fastest on record, with panelists blaming weak client demand and temporary business closures. Future outlook remained pessimistic. Negative sentiment was linked to substantial uncertainty, lockdown measures and expectations of a severe economic recession.