Services sector growth slows but outlook remains upbeat

The Nikkei India Services Purchasing Managers' Index (PMI) rose from 50.3 in February to 51.5 in March.

But services have not fallen below the 50 mark that separates growth from contraction since June 2012, when Ireland was halfway through a three-year worldwide bailout.

According to the survey, nearly one-quarter of companies anticipate higher activity levels over the coming 12 months, with confidence attributed to improved advertising and strengthening demand conditions.

It found that business activity in the services sector, which accounts for nearly 80% of United Kingdom output, bounced back from a five-month low in February as demand strengthened, particularly from overseas, though mounting costs were likely to have dented investment at home.

The services sector makes up over 80% of United Kingdom economic activity so is an influential gauge of the state of overall economic activity in the country.

Respondents were also optimistic about the year ahead, while there was evidence that the fall in the value of sterling since the Brexit vote had led to new sales inquiries from abroad and demand for overseas clients, especially in the US.

Companies last month reported a drop in trading activities for the first time in more than three years, a monthly survey showed yesterday, underlining a tough operating environment for the private sector. So, the sector's stalwart performance this month will need to improve significantly, before businesses raise their head-counts further.

Despite a marked and accelerated expansion of new work, the latest survey indicates that service providers added to their payrolls at a slower pace in March.

The all-sector PMI, covering manufacturing, construction and services, rose a full point to 54.7 in March.

The British services sector rebounded in March as the amount of new work jumped, despite prices rising at the fastest pace in eight years, according to a closely watched survey.

"A second month of easing inflationary pressures supported the recent decision by monetary policy makers to reduce interest rates", said Jones. New business and output rose for the second straight month in March, with rates of expansion accelerating in both cases. "This is shown by firms' willingness to hire additional employees and reinforced by stronger confidence towards the 12-month outlook for output".

India's retail inflation had risen to 3.65% in February after slowing to a five year low of 5.17% in January- below the Reserve Bank of India's target of 4%.

Despite the stronger-than-expected headline growth figure in today's PMI, the survey also suggested consumers were cutting back on luxuries.

  • Aubrey Nash