India's October services accelerated at its slowest pace since March as output and new business expansion remained soft due to inflationary pressure, a private survey showed.
At 58.4 in October, the seasonally adjusted S&P Global India Services PMI Business Activity Index indicated a substantial upturn in output, according to the release. This was despite the headline figure falling from 61 in September and signalling the slowest rate of expansion since March.
Anecdotal evidence indicated that growth was underpinned by the securing of new work, favourable demand trends, and positive market conditions, the survey showed. Competitive pressures and inflationary forces restricted the increase, according to surveyed firms.
New business received by service companies rose for the 27th month in a row in October. Although the weakest since May, the rate of growth remained substantial. Favourable customer interest and successful advertising induced the increase, anecdotal evidence showed, while fierce competition and subdued demand for certain types of services dampened the overall expansion.
October data highlighted the second-fastest upturn in international orders placed with Indian service companies since the series started in September 2014. Survey members noted gains from clients in Asia, Europe, and the US.
Services companies in India reported an increase in their expenses in October, which they attributed to higher food, fuel, and staff costs. Firms felt the need to share additional cost burdens with their clients in October, resulting in another monthly increase in selling prices. The rate of charge inflation was markedly above its long-run average and the joint-strongest in close to six and a half years.
Although India continued to post substantial growth in aggregate business activity, the upturn lost strength in October amid slower increases in manufacturing production and service activity.
The S&P Global India Composite PMI Output Index fell from 61 in September to 58.4, indicating the weakest rate of expansion since March.
The Future Activity Index fell by more than five points in October, signalling some loss of confidence surrounding the outlook for service output amid rising inflation expectations. The level of positive sentiment was nevertheless in line with the long-run series average. Advertising, plans to price competitively, better customer relations, and demand resilience were among the reasons underpinning optimism.
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