With economic conditions in the services sector weakening, broadly stagnant sales caused the first drop in business activity in over a year, a survey has said.
At 49.6 in June, down from 50.2 in May, the IHS Markit India Services Business Activity Index posted in contraction territory for the first time since May 2018. A reading below 50 indicates contraction in the business activity.
Although the labour market showed signs of resilience, there was a notable slowdown in job creation. “Optimism towards growth prospects was sustained, but confidence was down from May,” the survey said.
According to survey participants, weak sales, competitive pressures and unfavourable taxation all hampered output.
“New business rose only fractionally during June, with the respective index posting at a nine-month low.
Survey evidence indicated that some firms secured new work amid successful advertising, while others saw order books shrink due to competitive pressures and weak underlying demand,” IHS Markit India Services PMI said.
“International sales increased for the fourth straight month, albeit at the slowest pace in this sequence. Unfinished business continued to rise in June, which panel members linked to delayed client payments. The rate of backlog accumulation was, however, modest and the weakest in the year-to-date,” it said.
To assist with their workloads, services companies took on additional staff in June.
“The latest rise in employment was the twenty-second in as many months, but the slowest over this period. Firms that refrained from hiring mentioned that workforce numbers were sufficient to cope with current workloads,” the survey said.
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