Unprecedented surge in international sales helped the services sector to perform well in June as Purchasing Managers’ Index (PMI) for services rose to 60.5 in June as against 60.2 of May. Another good news is that services firm increased their staffing level.

Services has a share of over 53 per cent in Gross Value Added (GVA). Good performance of services sector was followed by similar trend in manufacturing. PMI for manufacturing rose to 58.3 in June, 0.8 percentage points higher than May.

It was supported by increased new orders and output. Consequently, firms increased their hiring at the fastest pace in over 19 years.

• Also read: Manufacturing recovered some ground in June as PMI rose to 58.3

“Activity growth in India’s service sector accelerated in June, with the index rising by 0.3ppt to 60.5, led by an increase in both domestic and international new orders. This encouraged services firms to increase their staffing levels at the fastest pace since August 2022,” Pranjul Bhandari, Chief India Economist at HSBC said.

The index is prepared on the basis of responses from purchasing executives of 400 firms.

Based on responses, the survey report mentioned that positive client appetite encouraged service providers in India to recruit additional staff at the end of the first fiscal quarter. The pace of job creation was marked and the strongest in 22 months. Anecdotal evidence highlighted a mixture of short term and permanent hires for junior-, medium- and senior level positions, it added.

Talking about new orders, the report listed Asia, Australia, Europe, Latin America, the Middle East and the US as sources of new work from abroad.

• Also read: PMI Manufacturing dropped to 3-month low at 57.5

Though companies recorded rise in the cost, but it was sharp rise. “Input costs rose at a moderate pace, resulting in a softer uptick in output charges in June,” Bhandari said. Reportedly due to higher food, fuel and labour costs, service providers recorded a moderate increase in their average expenses.

The pace of inflation was nevertheless the weakest in four months. Subsequently, selling prices also rose at the slowest pace since February.

Additional recruitment added to firms’ labour expenses and contributed to another increase in average cost burdens. Panellists also reported higher prices for food (chicken, eggs and vegetables) and fuel. Average input prices rose at a below-trend rate, however, and one that was the softest in four months.

• Also read: Flash services PMI up at 61.4 in May; manufacturing PMI down to 58.4

Service providers remained confident of a rise in business activity over the course of the coming 12 months, with nearly 23 per cent of panellists expressing optimism. That said, the overall level of positive sentiment slipped to an 11-month low, owing to concerns surrounding market uncertainty and competition. Overall, “service providers remain confident about the year ahead business outlook, although the level of optimism moderated sharply during the month,” Bhandari said.

She also added that the Composite PMI also accelerated in June, supported by greater inflows of new orders. Manufacturing firms contributed more to the expansion than services firm.