Services sector activity improves in September, PMI at 49.8: IHS Markit

Amid reports of the relaxation of coronavirus pandemic 2019 (Covid-19) restrictions, Indian service sector output broadly stabilised during September, according to the latest IHS Markit Services Purchasing Managers' Index (PMI) released on Tuesday.

Encouragingly, survey participants were upbeat about the year-ahead outlook for business activity for the first time since April.

On a less positive tone, there were further reductions in new work and employment. Incoming new business fell moderately, however, and at the slowest rate since March. Input costs meanwhile rose at a quicker pace while the rate of charge inflation was broadly similar to August.

The seasonally adjusted India Services Business Activity Index rose for the fifth straight month in September from 41.8 in August to 49.8. The latest reading was indicative of broadly stable output across the sector.

Monitored companies that observed growth commented on the reopening of business units amid the loosening of lockdown rules. Firms that reported a contraction mentioned the damaging impact of the pandemic on demand.

Indeed, overall new business declined. The fall was the seventh in consecutive months, though moderate and the weakest since March.

New orders from abroad likewise contracted at the slowest pace in six months but here the reduction was sharp. International demand was restricted by the global Covid-19 pandemic.

In line with hopes that a vaccine for Covid-19 will be rolled out, companies were optimistic about the year-ahead outlook for business activity.

September marked the first month since April in which service providers were confident towards growth prospects.

"The relaxation of lockdown rules in India helped the service sector move towards a recovery in September," said Pollyanna De Lima, Economics Associate Director at IHS Markit.

"Backlogs data suggests that hiring efforts will continue in the near-term. We could see a better employment trend in coming months provided that people are willing to leave their hometown in search for vacancies," she said.

The IHS Markit India Services PMI is compiled from responses to questionnaires sent to a panel of around 400 service sector companies. The sectors covered include consumer (excluding retail), transport, information, communication, finance, insurance, real estate and business services.

The panel is stratified by detailed sector and company workforce size based on contributions to GDP.

IHS Markit is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government.

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