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Service sector slips to contraction territory during November: PMI

Wednesday, December 06, 2017

Services sector activity in India slipped into contraction territory during November, post the implementation of the Goods and Service Tax (GST) that led to sluggish demand and lower customer turnout, says a monthly survey.

Posting below the no-change mark of 50.0 in November, the seasonally adjusted Business Activity Index signalled a contraction of the service sector for the first time in three months.

In PMI lexicon, a print above 50 means expansion and a score below that denotes contraction.

"Business under performance emanated from July's Goods and Services Tax (GST) which contributed to sluggish demand and lower customer turnout, according to anecdotal evidence," said Aashna Dodhia Economist at IHS Markit and author of the report.

Despite unfavourable demand conditions, service providers continued to add to their workforce numbers as the level of business sentiment in the service sector for the next 12- months rose at the strongest pace since July.

The latest services PMI follows the manufacturing one announced December 1, which showed that robust growth in manufacturing sector during November.

Accordingly, the Nikkei Composite Output Index, that maps both the manufacturing and services activity fell from 51.3 in October to a three-month low of 50.3 in November, signalling a broad stagnation in private sector output in India.

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