Services PMI for March highest in 3 months; increase in input cost

India’s services sector expanded at the fastest pace ever in March this year as easing of COVID-19 restrictions fueled demand, but elevated inflationary pressure A private survey has shown that business confidence has been clouded.

S&P Global India Services Purchasing Managers’ Index It rose to 53.6 in March, from 51.8 in February, beating the 52.5 estimate in a Reuters poll.

While the index remained above the 50 mark for the eighth consecutive month separating growth from contraction, input costs rose at the fastest pace in 11 years.

“The war in Ukraine has exacerbated pending issues in supply chains, leading to a spurt in inflation in the Indian service economy,” said Polyana de Lima, economics associate director at S&P Global.

high chemicals, fuelPrices for raw materials, retail, transportation and vegetables raised operating expenses, eroding business confidence.

Higher footfalls were driven by increased domestic demand, driving sales growth and pushing the new business sub-index to a three-month high.

However, international demand shrank at the fastest rate in six months as supply chains were affected due to the Russo-Ukraine war.

Business expectations turned positive on expectations that easing of virus control measures will support business activity. But concerns about higher inflation kept sentiment weak, roughly matching February’s levels.

Prices rose marginally as only a few firms passed the cost burden on to consumers.

De Lima said, “Sales were supported in part by a modest adjustment in output charges, although consumers may face rising prices in the coming months as the rising cost burden feeds through services charges.” “

Still, the Reserve Bank of India was not expected to raise its key interest rate until at least August, according to a Reuters poll of economists who said the central bank should now shift its focus from growth to inflation.

Firms reduced their workforce for the fourth straight month in March but there were potential signs of stabilization. The employment sub-index was the highest in this contraction streak and was only partially below the 50 threshold.

The composite index was at its highest level in three months, rising from 53.5 in March to 54.3.

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