Services PMI Spikes To 62.3 In July, Highest In More Than A Decade

Services activity in India surged sharply to 62.3 in July compared to a Purchasing Managers' Index (PMI) of 58.5 in June, says the data released by S&P Global on Thursday (August 3).

At 62.3, the July services PMI has broken a new record as it is the highest point in over 13 years. The last time it reached higher was in June 2010. It has also remained above the 50-mark that separates growth from a contraction for two consecutive years.

Regarding the sub-sector data, Finance & Insurance was the brightest spot regarding business activity and new orders, topping the growth rankings in both instances. As for inflation, the sharpest increase in input costs was seen in Consumer Services and for output charges in Real Estate & Business Services.

“Service providers noted the secondfastest increase in new export orders since the series started in September 2014. According to panellists, Bangladesh, Nepal, Sri Lanka and the UAE were key sources of growth,” S&P Global said in a statement. 

Commenting on the report, Pollyanna De Lima, Economics associate director at S&P Global Market Intelligence said, "The resilience of the service sector underscores its vital role in fuelling India's economy, with the PMI results for July so far pointing to a notable contribution from the sector to overall GDP for the second fiscal quarter.”

“The broad increases in sales across the domestic and international markets are particularly welcoming news, especially in light of the challenging global economic scenario. Firms noted a widespread upturn in services exports to several nations including Bangladesh, Nepal, Sri Lanka and the UAE,” she added.

India's manufacturing Purchasing Managers' Index (PMI) reached a 31-month high to 58.7% in May. The Manufacturing Purchasing Managers' Index, compiled by S&P Global, jumped to over a 2-1/2 year high of 58.7 in May. The seasonally adjusted PMI rose from 57.2 in April. 

This growth is attributed to robust demand and output, while an improved optimism ushered firms to hire at the quickest pace in six months.

The term Purchasing Managers Index (PMI) is sometimes used to know the statistics related to the economy as it indicates the economic health of the service and manufacturing sectors. Through PMI, the exact condition of the market can be ascertained.

PMI is also used to measure business output, new orders, employment, costs, selling prices, exports, purchasing activity, supplier performance, backlogs of orders and inventories of both inputs and finished goods. This time the PMI index increased in the month of May as compared to the month of April. 

Why is PMI important for the Indian economy?

The PMI survey is conducted every month. With the help of PMI, we can also get an estimate of the increase in income and economic activities. These figures are of immense importance for those who are a part of the industry. In a way, it can be said that PMI also gives a rough idea about prevailing sentiment in an economy. The PMI and its sub-indices are widely used to anticipate changing economic trends in official data such as GDP, or sometimes as an alternative gauge of economic performance and business conditions to official data.