Services sector activity hits 12-year high in Feb

The Indian services sector expanded at the strongest rate in 12 years in February supported by favourable demand conditions and new business gains, a monthly survey said on Friday.

The seasonally adjusted S&P Global India Services PMI Business Activity Index rose from 57.2 in January to 59.4 in February -- its highest level in 12 years.

For the 19th straight month, the headline figure was above the neutral 50 threshold. In Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion while a score below 50 denotes contraction.

"The service sector more than regained the growth momentum lost in January, posting the sharpest expansion in output for 12 years as demand resilience and competitive pricing policies underpinned the joint-best upturn in sales over the same period," said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

On the prices front, there was substantial moderation in cost pressures as input prices increased at the slowest pace in nearly two-and-a-half years and output charge inflation softened to a 12-month low.

New orders placed with service providers rose further in February, with several firms suggesting that competitive pricing boosted sales, the survey said.

Still, capacity pressures remained mild and jobs rose only marginally, it added.

"Despite the strong upturn in new business intakes, service providers noted only mild pressure on their capacities and, as a result, a large proportion of firms left payroll numbers unchanged," Lima said, adding that hiring growth was also dampened by a lack of confidence in the business environment.

The degree of optimism recorded in February was the lowest for seven months and below the historical trend as some companies doubted demand would remain this resilient.

Others displayed concerns surrounding fierce competition for new work.

Meanwhile, the S&P Global India Composite PMI Output Index -- which measures combined services and manufacturing output -- rose from 57.5 in January to 59 in February, highlighting a sharp and stronger rate of expansion.

"Services firms also recorded a faster upturn in new business than their manufacturing counterparts.

"At the composite level, sales expanded at the joint-quickest rate in 11 years," the survey said.

The S&P Global India Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 service sector companies.

The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. Data collection began in December 2005.