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The IHS Markit India Services Business Activity Index improved from 52.7 in November to 53.3 in December, highlighting the second-strongest rate of increase in output in over a year (behind July).
A reading below 50 on the index shows contraction while above that threshold indicates expansion.
“Survey members linked the rise to better market conditions and new business growth,” IHS Markit said in the report.
“It’s encouraging to see the Indian service sector continuing to recover from the subdued performances noted in September and October…the news of sustained job creation, robust new order growth and a pick-up in business confidence suggest that expansion can be maintained in the early part of 2020,” said Pollyanna de Lima, Principal Economist at IHS Markit.
As per the survey report, total sales expanded for the third consecutive month at the end of the year, and at the quickest pace since October 2016 while new business growth hit a 38-month high.
Among sectors, consumer services outperformed, posting by far the strongest increases in new business and output but also registered the steepest rise in input costs in December. The fastest increase in selling charges was recorded among Transport & Storage firms.
Input costs increased further in December, with firms citing higher charges for food, fuel, medical products and transport.
The overall rate of inflation was sharp and the fastest in just under seven years, according to the survey report.
Consequently, selling prices were lifted again at the year end, taking the current run of inflation to 35 months.
Employment, optimism
Amid reports of new business growth, service providers continued to hire extra staff in December. Employment increased for the twenty-eighth month in succession and at a rate that, although modest, was the quickest since August.
Indian services companies expect marketing efforts and favourable economic conditions to boost business activity during 2020. Despite rising to a four-month high, the overall level of positive sentiment remained below its long-run average.
Overall business activity
A sister survey last week showed manufacturing activity in December expanded to the highest level in the past seven months.
Put together, Indian private sector activity rose for the second month running in December and at the quickest pace since July. The Composite PMI Output Index was up from 52.7 in November to 53.7, reflecting stronger rates of expansion in both the manufacturing and service sectors.
Private sector jobs expanded for the twenty-ninth month in a row last month and to the greatest extent since August. The rise was broad-based across the manufacturing and service categories.
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