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Services Activity Accelerates In February As Demand Strengthens: Survey

Service providers remained optimistic about growth in the year ahead, although the expectations index remained well below the long-term average.

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Services Activity Accelerates In February As Demand Strengthens: Survey

Activity in country's huge service sector accelerated in February, partly due to an increase in domestic new business which induced firms to maintain a solid hiring pace, a private survey showed on Tuesday.

This will provide some relief to policymakers and bolster hopes for a recovery in economic growth this quarter after Asia's third-largest economy lost momentum in the final three months of 2018.

The Nikkei/IHS Markit Services Purchasing Managers' Index rose to 52.5 in February from January's 52.2, staying above the 50-mark that separates growth from contraction for a ninth straight month.

"The PMI survey showed faster increases in new work and business activity supporting one of the best upturns in jobs for eight years," said Pollyanna De Lima, principal economist at IHS Markit.

"Still, these results confirmed a growing performance mismatch between manufacturing and services. Goods-producing companies outperformed their services counterparts for the seventh straight month, with the gap in output performance the widest for a year."

That could be of concern as the services sector contributes about 35 per cent of total employment and 60 per cent to the country's gross domestic product.

A sister survey on March 1 showed factory activity accelerated at the fastest pace in more than a year in February on strong domestic demand and output.

Taken together, the surveys pushed the composite PMI, which includes both manufacturing and services, to a three-month high of 53.8 from January's 53.6.

A sub-index tracking new business orders in the services sector has shown expansion for a year.  While new export orders contracted slightly in February, firms maintained a strong hiring pace.

Despite input price pressures remaining high, firms did not fully pass that on to customers, suggesting overall inflation could remain below the Reserve Bank of India's medium-term target of 4 per cent in coming months, giving the central bank room to lower interest rates.

Service providers remained optimistic about growth in the year ahead, although the expectations index remained well below the long-term average.



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