January Services PMI Accelerates To 52.8; Firms Continue To Shed Jobs

India's services sector PMI reaches 52.8 in January on consumer optimism

India's services sector activity accelerated in January month owing to improvement in demand and consumer optimism driven by the roll out of the huge Covid 19 vaccinative drive, a private survey revealed on Wednesday.

The Nikkei/IHS Markit Services Purchasing Managers' Index rose to 52.8 in January from 52.3 in December, staying above the 50-level mark separating growth from contraction for the fourth straight month. Still, the headline figure remained below its long-run average of 53.3 and was consistent with a moderate pace of growth.

The data comes a couple of days after finance minister Nirmala Sitharman presented a growth-oriented budget for 2021-22 with a focus on increased spending to rescue the economy from the impact of the pandemic. The economic survey has estimated economic growth at 11 per cent for FY22.

January data indicated a strong rise in new orders and the increase was often attributed to greater demand from new and existing clients.

A closely watched survey of business confidence showed that despite activity dropping in January at the fastest rate since May 2020 firms are still looking forward to the future.

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Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said: "Their optimism is warranted, given that the UK's vaccination programme is proceeding speedily, and emerging research suggests that AstraZeneca's vaccine remains effective even when the second dose is delayed to 12 weeks, and helps to prevent onward transmission".

Tim Moore, economics director at IHS Markit, which compiles the survey, said: 'Positive news on the United Kingdom vaccine rollout pushed up business optimism to its strongest since May 2014 and this improvement contrasted with a decline in confidence reported by service providers in the euro area during January. Purchase prices and output charges increased in January.

"The main area of concern is the extent to which costs are rising across the services economy, with the rate of inflation remaining above trend despite easing from December", Lima said.

But amid hopes the vaccines being rolled out would allow for some return to normality, overall optimism about the year ahead remained resilient.

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