India services sector softens in September but PMI remains above 50

The key measures of sector performance tracked by the HSBC India Services PMI survey, compiled by S&P Global, continued to point to historically strong rates of expansion. Nevertheless, total new business, international sales and output all rose at the slowest rates since late-2023.

Among the main positive outcomes seen in September were solid job creation, strengthening business confidence and the weakest uptick in selling prices in over two-and-a-half years.

As has now been the case for over three years, the seasonally adjusted HSBC India Services Business Activity Index was above the neutral mark of 50.0 in September.

This indicated continuous monthly growth of output. Falling from 60.9 in August to 57.7, the headline figure signaled a softer albeit still historically-robust rate of expansion.

Several panelists attributed the increase in output to new business gains, positive demand trends and investment in technology. Growth was reportedly curbed by fierce competition, cost pressures and changes in consumer preference (i.e., switch to online services).

Similarly, new business intakes expanded sharply at the end of the second fiscal quarter, but the pace of growth retreated to a ten-month low.

Although aggregate output in India continued to expand substantially in September, the rate of increase softened to the slowest since November 2023. This was signaled by a fall in the HSBC India Composite Output Index from 60.7 in August to 58.3. Both factory production and services activity rose at slower rates.

Behind the slowdown in growth of private sector output was a softer, albeit still robust, expansion in new business. The rate of increase eased to a ten-month low. Notably, international sales growth receded to its weakest in 2024 so far and was considerably below that seen for total new work.

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