PMI Services falls slightly in May

A couple of days after the HSBC Purchasing Managers’ Index (PMI) showed a fall, to 57.5 in May from 58.8 in April, the final HSBC India Services Purchasing Managers’ Index, compiled by S&P Global, showed a decline, to 60.2 in May from April’s 60.8. The silver lining, though, is that both indices are firmly in the positive territory, as the 50 mark differentiates growth from contraction.

With activity in both manufacturing and services decreasing a little in May, the overall HSBC India Composite PMI output index also fell. “The HSBC India Composite Output Index slipped from 61.5 in April to 60.5 in May, highlighting the slowest rate of expansion since last December. There were softer increases in both factory production and services activity,” S&P said.

In May, services sector activity came down to a five-month low, which is attributed to weakened domestic demand. On the plus side, growth in exports was at a record pace and rise in employment generation to a 21-month high. Also, the HSBC India Services PMI has been above the 50 mark for the 34th consecutive month.

“India’s service activity rose at a slightly softer pace in May, with domestic new orders easing slightly, but remaining robust, implying strong demand conditions and successful advertising. New export orders surged at a record pace, with broad-based demand from across the globe. On the price front, cost pressures ticked up in May led by higher raw material and labor costs. Firms were only able to transfer a part of the price rise to customers. Good news is the level of optimism about the year-ahead outlook rose at the fastest pace in eight months, leading service firms to increase their staffing levels. Overall composite output rose at a slightly slower pace, led by slower rises in both factory production and service activity,” Maitreyi Das, global economist at HSBC, told the media.