HSBC’s India Services PMI Data Weakest In 18 Months

After a disappointing set of manufacturing PMI data, the HSBC Services PMI numbers for India (for April 2013) have also come in lower. This grew at 50.7 against 51.4 in March 2013 and is the slowest expansion in the last 18 months, as per data provider Markit.com (note that a reading above 50 indicates expansion and one below 50 indicates contraction).

Last week, the manufacturing PMI number came in at 51, the lowest since November 2011. HSBC’s India Composite Output Index too was down at 50.5 for April 2013, from 51.4 in March.

Private service companies have cited that the adverse market and weather conditions impacted their business during the month. Manufacturers said that power cuts are taking a toll on their businesses.

Job creation has increased moderately, but the pace is at a 7-month low. The data also suggests that backlog of work in the private sector has increased at a higher pace in April 2013, which means that companies have orders to be completed in the future.

During the month, raw material, labour and petrol costs saw a rise. Output prices too have moved up a bit. As per the press releases, both input and output prices have increased at the slowest pace in the last 30 months. This indicates that the inflation for April 2013 may show some easing. The WPI for March 2013 remained at 5.96, with moderation in food prices, which lead the RBI to cut the repo rate by 25 basis points.

The surveyed companies have said that they are expecting a good year ahead and will spend more on marketing activities to maintain brand reputation. As per these companies, demand will remain higher in this year.

Leif Eskesen, Chief Economist for India & ASEAN at HSBC said, “Activity in the service sector decelerated further in April, led by slower growth in new business. This led to a slowdown in employment growth and allowed businesses to better keep pace with their order books. Encouragingly, inflation pressures eased further, which has allowed the RBI to focus more on growth risks.”

Overall, the business sentiment has changed in the last few months, with the PMI numbers in most countries showing pressure on the manufacturing and services fronts. Though HSBC Services PMI numbers for India have come lower, the positive commentary of the private companies is something to cheer about. With the RBI cutting rates thrice already in this calendar year, the numbers may see some positive movement within the next few months.