India’s core services sector expanded at the fastest pace in 11 years in May on strong demand, a private survey showed, although inflationary pressures hit new highs, limiting optimism and weighing on consumers’ pockets. inserted.
S&P Global India The Services Purchasing Managers’ Index rose to 58.9 in May, up from 57.9 in April, the highest since April 2011 and comfortably beating a Reuters poll’s expectation of 57.5.
It stayed above the 50-mark, marking the tenth consecutive month of growth separating contraction, the longest streak of expansion since the 12 months of growth between June 2018 and May 2019.
Aggregate demand grew at the fastest pace since July 2011 as economic activity returned to normalcy with the lifting of pandemic restrictions.
“The reopening of the Indian economy continued to support growth in the services sector,” said Poliana de Lima, economics associate director at S&P Global Markets.
“That said, the inflation outlook has worsened as input prices rose at the fastest pace in the history of the survey.”
Those price hikes prompted trading expectations to remain historically low, despite a correction from April. While some firms expected a recovery in demand, others were concerned about inflationary pressures impacting growth.
Firms continued to pass on some of the cost to customers, though to a lesser extent.
“Output charge inflation softened only marginally from April, the second highest in less than five years, as several companies noted the need to transfer rising costs to customers,” De Lima said.
India’s economy expanded 4.1% year-on-year in the January-March quarter, but increased retail inflation due to the rise in energy and commodity prices due to the Russia-Ukraine war poses a risk to its growth prospects.
Asia’s third-largest economy is battling eight years of high inflation, which prompted the Reserve Bank of India (RBI) to hike rates in an unscheduled meeting on May 4.
The RBI is expecting further rate hikes in the coming months to ease the price pressure. After hiring for the first time in five months in April, service firms lost jobs at a modest rate in May.
Strong services and manufacturing activity raised the overall index to 58.3 from 57.6 in May, the highest level since November.
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