RTTNews - Thursday, the results of the HSBC Markit services purchasing managers' survey revealed that activity in India's all-important service sector continued to rise in August, marking the sixth consecutive month of expansion. However, the composite output purchasing managers' index fell slightly in August.

The services activity index was at 54.9 in August, up from 54.7 in the previous month, with the latest month's reading marking highest level since September 2008. The strong showing of the services sector in August was driven by new incoming businesses for services firms, which in turn was attributed to improving economic conditions. Successful advertising campaigns and strong reputations for quality were also cited as contributing factors for the rise.

Commenting on the Services PMI data, HSBC's Senior Asian Economist, Robert Prior-Wandesforde said, At 54.9, (the services activity index) is consistent with a robust growth of output in the services sector. He also revealed that business expectations showed an impressive improvement in August, jumping to 73.1 from 68.8 in July and a twenty-month low of 60.3 in February.

The volume of outstanding business at Indian service providers increased for the fourth month in a row, and also at a slightly faster pace. The composite backlogs of work index was virtually unmoved in August, and showed a slight overall accumulation of work-in-hand.

Capacity constraints forced service companies to recruit more personnel in August, with the sector's labor force steadily rising every month since April.

Output prices in the service sector were raised for the second successive month, in order to defend profit margins from rising costs or to take advantage of increasing demand. On the other hand, input prices increased at a modest rate in August.

The composite output index, which is a weighted average of the manufacturing output index and the services business activity index, was at 55 in August, down from 55.6 in July, although the significance of the drop was played down.

A small drop in the August composite PMI is a little disappointing, although we shouldn't necessarily read too much into this, Prior-Wandesforde said.

Meanwhile, in a separate report released earlier in the day, the Commerce Ministry announced that India's annual inflation for the week ended August 22 rose slightly to minus 0.21% from minus 0.95% in the previous week, marking the twelfth successive week that the wholesale price index remained in the negative.

The Indian economy grew at an annual rate of 6.1% in the first quarter, larger than the 5.8% growth seen in the prior quarter, the Central Statistical Organization revealed earlier in the week.

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