Services PMI contracts 1st time since 2011

NEW DELHI: The country's services sector output contracted in July for the first time since October 2011, providing more evidence of a deep slowdown and piling pressure on policymakers to take urgent measures to reverse the slowdown.
The HSBC Markit services sector PMI also showed that private sector output contracted for the first time in over four years
Manufacturers and service providers both recorded lower output levels, amid evidence of falling new business and a difficult economic climate, the survey showed.
At 48.4 in July, down from 50.9 in June, the HSBC India Composite Output Index was indicative of a moderate contraction overall, it said.
New orders received by private sector companies in India fell in July, amid reports of an increasingly fragile economy. Despite being moderate, the latest contraction was the first recorded since April 2009. This data comes close on the heels of the manufacturing PMI, which showed the sector nearing contraction.
"Activity in the service sector contracted in July led by a drop in new business, which also led to a decline in optimism among the surveyed companies," said Leif Eskesen, chief economist for India and Asean at HSBC.
"Meanwhile, inflation gauges softened on the back of weaker demand and tough competition. While RBI has to cater to the currency at the moment, it will eventually need to cater more to growth as economic activity continues to soften," he said.
Down from 51.7 in June to 47.9 in July, the seasonally adjusted HSBC Services Business Activity Index registered below the 50.0 no-change mark for the first time since October 2011 and was consistent with a moderate contraction. "Sector data indicated that the transport and storage and renting and business activities sub-sectors were the main drivers of the overall decline," the survey said.
Backlogs of work across the Indian private sector rose in July. Manufacturing companies indicated that unfinished business levels were accumulated as a result of power cuts and raw material shortages at suppliers, while service providers commented on delayed payment from clients, the survey said.
Staffing levels increased for the seventeenth consecutive month in July, with companies citing increased business requirements. Employment growth was broad-based with manufacturing and services firms both signaling job creation.
The overall rate of increase was, however, modest. Reflective of higher prices paid for inputs, private sector firms in India raised their tariffs again in July. Whereas the rate of charge inflation in the manufacturing sector accelerated to the quickest since February, prices charged by service providers rose at the slowest pace,
Where input costs rose, service providers reported higher prices paid for fuel, labour and raw materials, the survey showed.