HSBC India Services PMI for June 2013 stands at 51.7

In another indication of a slowing economic activity, the seasonally adjusted HSBC Services Business Activity Index for India fell to 51.7 for June 2013. The index fell from May’s three-month high of 53.6. Although reading above 50 indicates that there is expansion in the activity, but on the flip side it also shows the deceleration in the activity that the rate of growth has slowed down.

Services companies registered weaker gains in new work, while production at manufacturers fell for the first time since March 2009. The reasons cited for this are competition for new work and subdued economic conditions. In the press release, Leif Eskesen, Chief Economist for India & ASEAN at HSBC, said “Service sector activity grew at a slower clip as new business flows moderated, which made businesses less optimistic about the year ahead. Notwithstanding the slowdown, inflation readings firmed on the back of higher labour and raw material prices, with the depreciation of the Rupee also cited as a factor”.

Couple of days back the data for manufacturing PMI also came in which again was on lower side and stood at 50.3. Therefore the HSBC India Composite Output Index fell from 52.0 in May to 50.9. This was consistent with a marginal rate of expansion, one that was the second-weakest in over a year-and-a-half. The slowdown in the services activity impacts more for a country like India that drives 60 per cent of its GDP from services sector.

One of the silver linings, nonetheless, was increase in employment that rose faster across both the manufacturing and service sectors. Job creation for the private sector overall was moderate, but the quickest in last nine months.

One of the worrying factors in the survey was rise in the inflation especially in the input prices, which rose fastest in last three months. Even output prices rose but was muted due to higher competition.

These numbers clearly reflect although rate of growth is slowing, rate of inflation is also inching up, which further dampens any hope of rate cut in next RBI meeting.