Services sector PMI: Best 7-mth growth

The HSBC purchasing manager8217;s index PMI for the services sector,which gauges the activity of hundreds of Indian companies,rose to 55.8 in September from August8217;s 55.0.

A reading of 50 and above separates growth from contraction and the index has held above the break-even mark since November last year.

India8217;s services sector makes up for over 60 percent of the country8217;s gross domestic product and a strong reading in HSBC8217;s survey augurs well for the economy,where growth has faltered in recent months against the backdrop of political upheaval.

Service sector activity grew at a faster clip in September led by firm demand,underscoring its resilience,said Leif Eskesen,an economist at HSBC.

This further lifted employment,which helped businesses keep up with orders.

The new business sub-index surged to its highest since February allowing firms to hire more workers,and employment touched a 15-month high.

But survey participants are now less optimistic about the future. The sub-index measuring business expectations,a gauge of what firms think conditions will be like in a year8217;s time,fell to 67.2 from 74.0 in August.

Policy measures taken by the U.S. Federal Reserve and the European central bank to shore up their respective economies have led to an increase in demand for Indian services. Still,the fragile recovery in the U.S. and a dire euro zone economy pose a threat to India8217;s export dependant services sector.

Growth in Asia8217;s third-largest economy languished near its slowest in three years at 5.5 percent in the quarter ended June,as the lack of reforms by New Delhi and high interest rates hurt investment.

Determined to regain investor confidence and bring the economy back on track,the government launched a slew of reforms last month by slashing fuel subsidies and inviting foreign investments in retail,aviation and broadcasting.

RISING PRICES

Prices also rose at a faster pace in September from the previous month,the survey showed. That could further fuel wider inflation in the economy where the wholesale price index rose to 7.55 percent in August after a temporary slip in July to a three-year low.

Liquidity injections from the Fed and other major central banks have in the past pushed global commodity prices higher and resulted in rising inflation in emerging markets.

That could pose a complication for the Reserve Bank of India which,although determined to fight inflation,may find the task difficult.

The RBI has limited room for policy rate cuts given the persistence of inflation,although further progress on fiscal consolidation and structural reforms may eventually pave the way for some easing,Eskesen said.

A similar survey on Monday showed factory activity expanded at a steady pace in September as new orders and output rose.

India8217;s services PMI jumps to 7 mth high of 55.8 in Sept

PTI India8217;s services sector expanded further in September 8211; registering the fastest pace of growth in seven months 8211; driven by firm demand and 8220;resilience8221; of the sector,an HSBC survey said.

The HSBC8217;s Services Purchasing Managers Index PMI for September inched upwards to 55.8 from 55 in August. Since November 2011,the index has kept above the 50-mark which indicates expansion.

8220;Services sector activity grew at a faster clip in September led by firm demand,underscoring the resilience of the service sector,8221; HSBC Chief Economist for India and ASEAN Leif Eskesen said.

During the month,the service sector saw new orders expanding at a sharp rate 8212; fastest in seven months. Moreover services companies also remained optimistic on the short-term business outlook.

Earlier,an HSBC survey had shown that India8217;s manufacturing sector 8220;held steady8221; in September supported by faster output growth and rising export orders.

Accordingly,the HSBC India Composite Output Index,which maps both services and manufacturing activity,stood at 55 during the month,up from August8217;s reading of 54.3,signalling further improvement in the private sector activity.

On inflation,HSBC said the pressures have 8220;firmed8221; again on the back of rising costs and the Central bank has limited room for policy rate cuts given the 8220;persistence8221; in the rate of price rise.

Both service providers and manufacturers witnessed rise in input costs in September. But manufacturers registered the fastest increase in input prices since June due to rising raw material and diesel prices.

Retail inflation in August stood at 10.03 per cent,according to official data.

8220;The RBI has limited room for policy rate cuts given the persistence of inflation,although further progress on fiscal consolidation and structural reforms may eventually pave the way for some easing,8221; Eskesen said.

The government has recently taken a number of reform initiatives such as opening the multi-brand retail and aviation sectors to FDI,hiking diesel prices and capping the number of subsidised LPG cylinders.

In another round of big-ticket reforms,the Union Cabinet today is widely expected to consider raising the FDI cap in the insurance sector to 49 per cent and opening up the pension sector to foreign investment.

On the employment front,HSBC said more jobs were recorded in the private sector during September,marking a seven-month sequence of expanding workforce.