India's Services PMI Hits Three-Month High In December

Services activity in the country highlighted a pick-up in growth momentum in December, a private survey showed.

The seasonally adjusted HSBC India Services PMI Business Activity rose to 59 in December from 56.9 in November, highlighting a sharp increase in output that was the most pronounced since September, according to a release on Friday. A print above 50 means expansion, while a reading below 50 indicates contraction.

Favourable economic conditions and positive demand trends were the key determinants of output growth, as anecdotal evidence showed. The rise in total new business was supported by the continued growth of international sales, the PMI release said.

Service providers noted higher demand from clients based in Australia, Canada, Europe, the Middle East and South America in December. It has eased since November, but the rate of expansion in new export orders was modest and the softest since June, it said.

Services firms in India expect the strong demand momentum to continue into 2024, which, coupled with advertising and better customer relationships, underpins upbeat forecasts for output. The overall degree of business optimism was strong and better than in November.

The PMI data showed job creation in India's service economy. Survey participants indicated that new workers had been hired on both a full-time and part-time basis.

Amid higher prices of food and some other inputs, the average expense of service firms continued to increase at the end of the third quarter of the current financial year. The overall rate of inflation was modest, below its long-run average, and the weakest in nearly three and a-half years. Still, there was a mild pick-up in inflation in December.

The rate of increase in prices charged for the provision of services in India was solid, above its long-run average, and faster than that seen for input costs. The upturn was induced by rising instances of firms passing on cost burdens to their customers, according to the release.

The HSBC India Composite PMI Output increased from 57.4 to 58.5 last month, signalling a sharp rate of expansion that was the strongest since September.