India’s services sector grows in June on solid growth in new orders, exports: PMI

Growth in India’s services sector accelerated in June from a five-month low in May, helped by stronger growth in new orders and an unprecedented expansion in international sales, a monthly survey showed on Wednesday.

HSBC India’s seasonally adjusted services sector business activity index rose to 60.5 in June from 60.2 in May, indicating a sharp increase in output.

In Purchasing Managers’ Index (PMI) terminology, a result above 50 indicates expansion, while a result below 50 indicates recession.

“Activity growth in India’s services sector accelerated in June, with the index rising 0.3 percentage points to 60.5, driven by a pick-up in new domestic and international orders. This spurred service firms to add staff at the fastest pace since August 2022,” said Pranjul Bhandari, chief India economist at HSBC.

Strength in demand and growing new customer inflows were cited as key growth drivers. New orders received by Indian service providers continued to grow in June, extending the current expansion sequence to almost three years.

There was also a record increase in international orders. Asia, Australia, Europe, Latin America, the Middle East and the US were cited as sources of new work from abroad.

Positive customer appetite encouraged service providers in India to recruit additional staff towards the end of the fiscal first quarter, with hiring growing at the fastest pace since August 2022 as short-term and permanent staff were hired to support new orders.

On the price front, service providers saw moderate increases in average spending due to higher food, fuel and labor costs. However, the pace of inflation was the weakest in four months. Then, sales prices also rose at the slowest pace since February.

Looking ahead, service providers remain confident of an increase in business activity over the next 12 months, with almost 23% of panelists expressing optimism.

“Input costs rose at a moderate pace, resulting in a milder increase in input charges in June. Overall, service providers remain confident about the business outlook for the coming year, although optimism levels declined sharply during the month,” Bhandari said.

Meanwhile, the HSBC India Composite Production Index rose to 60.9 in June from 60.5 in May as new orders and production rose faster.

“The Composite PMI also accelerated in June, supported by stronger inflow of new orders. Manufacturing firms contributed more to the expansion than services firms,” Bhandari said.

The composite PMI indices are weighted averages of comparable PMI indices for the manufacturing and services sectors.

Private sector employment has grown at a rapid pace, one of the fastest since records began in December 2005.

The HSBC India Services PMI is compiled by S&P Global based on responses to questionnaires sent to a group of around 400 companies in the services sector.