July PMI services growth slips to 4-month low on rising inflation


The S&P Global decreased to 55.5 in July 2022 from 59.2 in June, and below market consensus of 58.5, pointing to the weakest expansion in the sector since March, as weaker sales growth and inflationary pressures restricted the latest upturn in business activity.

But the index has been above the 50-mark that separates growth from contraction for a year and July’s reading was higher than the long-term average.

Moreover, despite sliding from an over 11-year high set in June, the relatively strong reading was underpinned by firm domestic demand.

Also Read | PMI: Service activity touches 11-year high of 58.9 in May on strong demand

“There were many positives in the latest results. Business activity continued to rise strongly, with a similarly robust uplift in new business as the offering of new services and marketing efforts bore fruit,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

“There was, however, a noticeable loss of momentum for the Indian service economy as demand was somewhat curtailed by competitive pressures, elevated inflation and unfavourable weather.”

Like many other countries, Asia’s third largest economy has been grappling with soaring inflation – at a near-decade high – exacerbated by rising commodity prices. A weaker rupee has further bumped up imported inflation.

The (RBI) embarked on its tightening cycle in May, later than most of its peers, but is expected to front-load subsequent hikes to combat inflation.

The new business sub-index was at a four-month low but faired well on historical standards as domestic demand remained firm. New export orders contracted for a 29th straight month, since the onset of the coronavirus pandemic.

Most firms had enough manpower to handle current requirements leading to subdued job creation last month, much the same as in June.

Input prices rose sharply and stayed above the long-run average, despite softening to the slowest pace since February. Food, fuel, inputs, labour, retail, tool and transportation costs were all up.

Firms chose to pass some of the additional costs to customers and although that pace eased from an almost five-year high set in June it was still above trend.

The overall S&P Global India Composite Output Index was strong at 56.6, supported by the factory that rose to its highest since November. However, the composite PMI was at a four-month low and down from 58.2 in June.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor


Source link

Comments are closed.