India’s services activity contracts fourth month in a row-Services PMI at 34.2

Published: August 5, 2020

The services industry in the country has shown contraction for the fourth straight month in July since the sales plunged and companies were prevented from manufacturing activities due to the lockdown situation imposed owing to the COVID 19 pandemic. The data has been published by a monthly survey on the services sector in India.

Highlights of the Survey Report

The IHS Markit Services Business Activity Index rose to 34.2 in July which is marginally higher than the figure of 33.7 in June. In the PMI parlance, the 50-mark threshold divides the expansion and contraction of services activities in a country. The services PMI had been rising for the last three months, but that pace has decreased considerably now.

Reason for Contraction

During the month of July, the new orders fell at the sharpest pace as the clients quoted very low requirement. As domestic demand remained soft, export orders also saw a decline during the last month. The new export orders showed the sharpest decline in July. Lay-offs also continued for almost all the sectors. The rate of such lay-off was also the fastest, on the back of weak demand and temporary business concerns.

Background

The Services Sector showed an 85-month high in February because of the new orders from the overseas firms but after that, the growth has stagnated and the number of jobs created also started falling.

What is IHS-Markit Composite PMI Output Index?

This is used to calculate growth after considering the manufacturing and services indices relative to the size of the country’s gross domestic product. It fell to 37.2 in July, down from 37.8 in June. It showed a record low of 7.2 in April, thereby signalling a serious slowdown in overall private-sector output growth.

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