India's Services Growth Slows To 11-Month Low In December On Weak Orders
India's services sector growth decelerated significantly in December with the PMI falling to 58.0, its lowest level in 11 months. The slowdown was driven by weaker new work orders, reduced output growth, and deteriorating employment conditions that ended a 42-month job creation streak. Despite remaining above the expansion threshold, business confidence dropped to multi-year lows, signaling potential moderation in growth ahead.
*this image is generated using AI for illustrative purposes only.
India's services sector growth lost momentum in December, expanding at its slowest pace in nearly a year as fresh demand softened and hiring activity stalled. The HSBC India Services PMI Business Activity Index dropped from 59.8 in November to 58.0 in December, marking an 11-month low and its weakest reading since January.
Key PMI Performance Metrics
The latest reading came in below the flash estimate of 59.1, though it remains well above the critical 50.0 threshold that separates expansion from contraction. The December figure represents the slowest growth pace in the services sector since early in the year.
| Metric: | December | November | Change |
|---|---|---|---|
| Services PMI: | 58.0 | 59.8 | -1.8 points |
| Flash Estimate: | 59.1 | - | -1.1 points below actual |
| Composite PMI: | 57.8 | 59.7 | -1.9 points |
Demand and Employment Challenges
Growth in new work orders and output slowed to the weakest pace in nearly a year, with momentum in new business weakening to its slowest pace since January. Although firms continued to report healthy client interest, growth was tempered by intensifying competition, particularly from alternative service providers offering lower-priced options.
Employment conditions deteriorated significantly during the month, ending a 42-month streak of job creation that had been rising since June 2022. Companies marginally reduced staffing levels as firms faced little pressure on operating capacity, though the vast majority of respondents reported no change in their workforce numbers.
Economic Outlook and Inflation Trends
Business confidence slipped to its lowest level in almost three-and-a-half years, weakening for the third consecutive month. However, companies remained optimistic about long-term prospects, and new export orders showed improvement, picking up from an eight-month low recorded in November.
On the cost front, input price inflation edged higher in December compared to the previous month but remained below the long-term average. Output price pressures stayed subdued, with fewer than 3% of surveyed firms increasing their charges.
Broader Economic Impact
Reflecting the broader slowdown, HSBC's India Composite PMI, which includes manufacturing activity, declined to 57.8 in December from 59.7 in November, marking its lowest level in 11 months. Manufacturing output expanded at its weakest pace in two years, contributing to the overall deceleration.
"Although India's service sector maintained a strong performance in December, several indicators retreated as the year drew to a close," noted Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence. "The retreat in several survey indicators may suggest a moderation in growth heading into the new year."
De Lima added that the benign inflation environment provides some optimism: "If services firms continue to see only mild increases in their expenses, they should be better positioned to compete and limit price hikes, thereby boosting sales and creating more jobs."
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