Services PMI shows surge in December 2022, private sector output growth rises to 11-year high

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India’s Services sector reported a sharp growth in new business in December 2022, led by finance and insurance services, as per the S&P Global India Services Purchasing Managers’ Index (PMI) which surged to 58.5 last month from 56.4 in November 2022. A reading of 50 on the index indicates no change in business activity levels.  

This is the 17th month in a row that new orders grew for Services firms and the uptick was sharpest since August 2022, as per the Survey-based PMI Business Activity Index which reflected the strongest pace of overall growth in Services since mid-2022.  

With the India Manufacturing PMI also reporting a strong rise in December, the S&P Global India Composite PMI Output Index for the month sped from 56.7 in November to 59.4 in December, marking the quickest rate of growth since January 2012, or nearly eleven years.   

Real Estate & Business Services saw the slowest expansion in new orders during December, even as input cost inflation accelerated from November 2022 levels, with firms mentioning wage pressures and higher prices for energy, food and transportation.  

Consumer services were hit the most by this surge in input cost inflation, while financial and insurance services firms enhanced their charges by the most extent for the second successive month.  

The Services sector continued to scale up hiring to keep pace with the upturn in output and business, but the extent of job creation dropped to a five-month low. Though overall positive sentiment was above-average, companies were ‘least upbeat’ in three months with competitive pressures and inflation concerns dampening overall optimism, the firm said. 

“As we head into 2023, companies signalled strong optimism towards the outlook for output. Around 31% of panellists forecast growth, while only 2% anticipate a contraction,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.  

“Inflation trends were mixed, as input prices rose at a faster pace and the upturn in charges moderated. On the expense front, services firms reported pressure from energy, food, staff and transportation costs and several companies felt the need to transfer escalating costs through to clients,” she added.

Composite PMI 

Aggregate sales rose sharply and at the fastest pace since August, boosted by quicker expansions at goods producers and services companies, S&P Global noted about the combined performance of the manufacturing and services sector in December.

“With capacity pressures remaining mild, job creation across the private sector slowed to a five-month low. At the composite level, the rate of inflation was at a two-month high and above its long-run average. Output charge inflation across the private sector also ticked higher, as a stronger increase in the manufacturing industry more than offset a slowdown among service providers,” it underlined.