Reduction in India services activity accelerates, while manufacturing production rises further in May 2015. The seasonally adjusted Nikkei Services Business Activity Index posted 47.7 in June. Down from 49.6 in May to its lowest level since March 2014, the latest reading was indicative of a moderate rate of decline. Business activity fell in five of the six monitored categories, the exception being Hotels & Restaurants.
June data pointed to a decline in output in the Indian private sector economy. Falling to 49.2, from 51.2 In May, the seasonally adjusted Nikkei India Composite PMI Output Index recorded below the crucial 50.0 threshold for the first time since April 2014. Reductions in activity were centred at service providers, as manufacturing production rose during the month.
Underlying the drop in services activity was a further contraction in new business. June's reduction in new work was the quickest since December 2013, with panellists commenting on competitive pressures and extreme heat. Order book volumes received by manufacturers, increased further, although at a modest and softer pace. Incoming new work across the private sector as a whole fell, ending a 13-month sequence of growth.
Despite the lack of incoming work, services companies indicated that outstanding business increased during June. That said, the rate of accumulation was only marginal. There were mentions of delayed payments from clients. Backlogs of work at manufacturers also rose marginally.
Indian service providers raised employment further in June. The rate of job creation was, however, only marginal and slower than the long-run series average. Manufacturing workforce numbers were broadly unchanged in the latest month.
The pass on of rising services costs was reflected in a further increase in output prices during June. However, charges were raised at a slight rate that was below the series long-run trend. A weaker rise in tariffs was also noted in the goods-producing sector.
Input prices faced by Indian services firms rose at a softer pace in June, with inflation well below the series average. Slower increases in cost burdens were noted across the six monitored service categories. In the manufacturing sector, the latest rise in input prices was the weakest in the current four-month sequence of inflation.
Confidence among Indian service providers remained strong in June, with panellists on balance expecting activity to increase over the coming 12 months. However, the degree of positive sentiment expressed was the lowest in three months and weak by historical standards. Those panellists anticipating growth of activity cited new projects, improved marketing strategies and hopes of better economic conditions.
Pollyanna De Lima, economist at Markit, which compiles the survey, said, ''June's Indian service sector data disappointed, with reductions in both activity and new business accelerating since May. The heatwave and competitive pressures were again reported to have weighed on service providers’ performance. However, companies are hopeful of turning the corner in coming months, with confidence regarding the 12-month outlook remaining strong.
Growth of manufacturing production was insufficient to offset the decline in services output and private sector activity fell for the first time since April 2014 during June. The Composite Output Index fell from an average reading of 53.3 in January-March to 51.0 in the three months to June, suggesting that GDP growth have weakened in the April quarter.
On the positive side, inflation rates softened in June. Weaker rises in input costs and output charges were seen across both the manufacturing and service sectors. All in all, latest data suggest that the RBI’s commitment to support economic growth may result in further rate cuts at its August meeting, probably the last in 2015.''
