After manufacturing, services sector activity too slowed down in March: PMI survey

After manufacturing, services too slowed down in March, a survey result of IHS Markit said on Wednesday. Purchasing Managers’ Index (PMI) for services slipped to 54.6 in March from 55.3 in February.

“The latest reading was consistent with a slower but still marked pace of expansion,” IHS Markit said in its monthly report on PMI. This index is prepared by compiling responses from questionnaires sent to a panel of around 400 service sector companies. A diffusion index is calculated for each survey variable.

The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease.

‘Seven months low’

On Monday, the agency had said that manufacturing PMI dropped 55.4 in March as against 57.5 in February which was a seven-months low. Manufacturing has nearly a 15 per cent share in GDP while Service sector is the largest contributor in GDP with around a 55 per cent share.

Commenting on the latest survey results, Pollyanna De Lima, Economics Associate Director at IHS Markit, said while the March results showed that service sector growth in India softened, rates of expansion for output and new business remained strong relative to the survey trend. The elections supported the uptick in demand, but the Covid-19 pandemic and reduced footfall restricted the upturn.

“Transport and storage was the key source of strength during March, with the sector recording sharp and accelerated increases in sales and business activity that was the strongest of all monitored categories. Consumer Services and Finance & Insurance remained in expansion mode, while contractions were evident in Information & Communication, and Real Estate and Business Services,” she said

New wave of Covid-19

She apprehended that the escalation of the pandemic and the reinstatement of restrictions could cause a notable slowdown in growth during April. Service providers hope for an improvement in vaccine availability, which would curb the spread of the disease and support the economy. Optimism towards the year-ahead outlook for business activity was sustained, but the overall level of confidence was unchanged from February and remained below its long-run average.

Talking about employment the survey report said that job shedding occurred despite a further increase in outstanding business at services firms. Backlogs of work rose for the tenth month running, but at the weakest pace since last June.

“Looking ahead, companies expect business activity to increase over the course of the coming 12 months,” the report said while adding that rising client enquiries and hopes for greater vaccine availability were the key reasons underpinning optimism in March. The overall level of confidence was unchanged from February

Composite PMI

As the manufacturing sector already slowed down, the Composite PMI Output Index was at 56 in March, down from 57.3 in February, signalling expansion for the seventh month running. Softer increases were recorded in the manufacturing and service sectors.

New business received by private sector companies rose for the seventh consecutive month in March. Despite softening from February, the pace of expansion was solid. Growth was led by goods producers, although rates of increase eased in both categories. Aggregate employment decreased further, marking a 13-month sequence of job shedding, the report said.

COMMENT NOW