Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

India's Nov services activity growth hit 3-month high, high inflation a concern

Published 12/05/2022, 12:02 AM
Updated 12/05/2022, 12:05 AM
© Reuters. FILE PHOTO: Boman Kohinoor (C), the 91-year-old co-owner of the Britannia and Co. restaurant, speaks to customers before taking down their food order, in Mumbai September 19, 2013. REUTERS/Danish Siddiqui

By Indradip Ghosh

BENGALURU (Reuters) - India's services activity grew at its quickest pace in three months in November on strong demand, lifting optimism to its highest in eight years, according to a business survey, which also showed prices rose at the fastest rate since July 2017.

The S&P Global (NYSE:SPGI) India services purchasing managers' index rose to 56.4 in November from 55.1 in October, beating the 55.4 estimate in a Reuters poll.

It remained above the 50-mark separating growth from contraction for a 16th straight month, its longest stretch of expansion since October 2016.

"Indian service providers continued to reap the benefits of strong domestic demand, with PMI data for the penultimate month of 2022 showing faster increases in new business and output," noted Pollyanna De Lima, economics associate director at S&P Global.

"Moreover, expectations of demand buoyancy in the medium-term promoted further job creation."

Official data released last week showed pent-up demand for services helped private consumption grow 9.7% annually last quarter, which helped Asia's third-largest economy grow 6.3% during the period.

However, growth is widely expected to slow in the coming quarters as high-interest rates hamper economic activity.

The PMI showed overseas demand expanded for the first time since the pandemic started, an encouraging sign given slowing global growth has already started to hurt exports, which fell 17% over a year ago in October.

Strong demand boosted business confidence to its highest since January 2015.

However, elevated input prices forced firms to raise prices charged at the sharpest rate in about five-and-a-half years.

That could put further pressure on overall inflation, which eased to a three-month low of 6.77% in October but remained above the Reserve Bank of India's tolerance limit.

"Evidence of stubborn inflation may prompt further hikes to the policy rate at a time when global economic challenges could negatively impact on India's growth," added De Lima.

© Reuters. FILE PHOTO: Boman Kohinoor (C), the 91-year-old co-owner of the Britannia and Co. restaurant, speaks to customers before taking down their food order, in Mumbai September 19, 2013. REUTERS/Danish Siddiqui

The RBI, which has already raised its key interest rates by 190 basis points since May, will hike the repo rate by a smaller 35 basis points to 6.25% on Wednesday and to a peak of 6.50% by end-March, according to a Reuters poll.

Stronger expansion in services activity alongside better-than-expected manufacturing growth boosted the composite index to a three-month high of 56.7 in November from 55.5 in October.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.