Services PMI slips into contraction; at 3-months low

Following the slump in the Indian economy, Services sector, the biggest sector the economy plummeted into contraction mode in the month of November as divulged by the Nikkei purchasing managers’ index (PMI). The overall demand in the economy has come to a major low post the roll out of GST.
 
The services PMI declined to 48.5 points in November against 51.7 points in October 2017. The November reading of the services PMI was the weakest in the last three months. Readings below 50 points depict contraction, whereas, the readings above 50 depict expansion.
 
The slump in the services PMI is a preface to a laggard growth story and slow recovery in the economy, although the economic growth of the country improved to 6.3 per cent in the Q2 of FY18, against a growth rate of 5.7 per cent in the first quarter of the fiscal year.
 
The Nikkei Composite Output Index activity, which takes into account both the manufacturing and services sector, also witnessed a decline to 50.3 points in November against 51.3 points in October 2017. This index too fell to its 3-month low in November on the back of a critical stagnation in the private sector outputs of the economy.
 
However, the employment scenario in the economy improved slightly in November with a rise in jobs in the services sector, despite a contraction.
 
Meanwhile, the Reserve Bank of India is expected to hold its rates in caution of inflationary trends. The input costs have been on a rise in the economy as a consequence of rising food and fuel taxes and higher taxes.