India's services growth improves in August, but remains near four-year low

The HSBC India Services Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 54.1 in August, from 53.3 in July. A PMI reading above 50 indicates growth, while a reading below 50 points to a contraction.

In Short

• India's services PMI rose to 54.1 in August from 53.3 in July
• New business growth remained weak, near four-year low
• Business confidence stayed below long-term average

India's services sector saw a small improvement in growth in August, but demand remained weak, keeping overall activity close to a four-year low, according to HSBC India Services PMI survey. At the same time, services firms increased hiring at the fastest pace in more than a year.

The HSBC India Services Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 54.1 in August, from 53.3 in July. However, the reading was slightly below the preliminary estimate of 54.5.

A PMI reading above 50 indicates growth, while a reading below 50 points to a contraction.

NEW BUSINESS GROWTH REMAINS WEAK

Despite the improvement in the headline PMI, new business growth remained subdued. New business, which is a key measure of demand, grew at its second-slowest pace in more than four years.

New export orders also offered little support, growing at broadly the same pace as in July.

The headline services PMI was also slightly below its long-run average, showing that the sector's recovery remained modest.

SERVICES FIRMS STEP UP HIRING

One of the more positive signs came from the labour market. Services companies increased hiring at the fastest rate in 15 months, suggesting that businesses still have some confidence in their prospects.

However, business confidence remained below its long-run average for the second consecutive month. Firms remained cautiously hopeful that market conditions and demand would improve.

PRICE PRESSURES RISE

Cost pressures increased slightly during August. Services firms raised the prices charged to clients at the fastest pace since March, as companies passed on higher operating costs.

Meanwhile, India's Composite PMI, which combines services and manufacturing activity, remained unchanged at 54.3.

The steady composite reading came despite weaker manufacturing growth, which fell to a five-year low. A faster expansion in services helped offset the slowdown in manufacturing.

- Ends