Services activity contracts to 11-month low in June
NEW DELHI: India’s services activity fell to an 11-month low in June, contracting for the second month in a row, indicating that service companies continued to suffer losses amid consumer confidence despite states easing lockdown restrictions amid steadily declining covid-19 cases.
Data released by IHS Markit showed that the Service Purchasing Managers Index (PMI) for June fell to 41.2 from 46.4 in May. A number below 50 indicates a contraction, while a higher reading signals an expansion in economic activity. The June manufacturing PMI contracted after an 11-month gap, according to data released last week.
“New work entries and exits contracted at the fastest rate since July 2020, prompting companies to cut employment again. Companies monitored generally reported that the intensification of the COVID-19 crisis and the tight restrictions have dampened demand for the services, ”the data analytics company said. .
Trade activity and new orders declined in four of the five major areas of the service economy, with the fastest rates of contraction recorded in consumer services. Transportation and storage is the only growing segment. “International demand for Indian services deteriorated further in June, as new export orders fell for the sixteenth consecutive month. The pace of the contraction has remained rapid, despite easing from May, “IHS Markit said.
Along with a further reduction in the number of new jobs, companies reduced their workforce midway through 2021. “The decline in employment was the seventh in consecutive months and the fastest during this period. The decline in employment was widespread in all five sub-sectors monitored, and led by consumer services, ”the data company said.
The companies reported that average input prices continued to climb due to rising costs of transportation and materials. “The inflation rate was at its lowest for five months, but exceeded its long-term average. Finance & Insurance was the only category to record a drop in input prices, ”he added.
Pollyanna De Lima, associate director of economics at IHS Markit, said uncertainty over the course of the pandemic has constrained business confidence among service companies, with overall sentiment sliding to its lowest level in ten months. “With India expanding its vaccine options and the government announcing ambitious plans to immunize the entire adult population by the end of the year, it is hoped that the pandemic can be brought under control and that a sustainable economic recovery can be achieved. start, ”she added.
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