Weak demand drags India’s services activity into contraction in May: PMI

NEW DELHI

Jun 6, 2018-

Activity in India’s service industry shrank in May for the first time in three months as new orders stagnated, but business optimism was the highest since 2015 on expectations that demand will turn around, a business survey showed. The Nikkei/IHS Markit Services Purchasing Managers’ Index fell to 49.6 in May from April’s 51.4, sinking below the 50-mark that separates growth from contraction. While data last week showed Asia’s third-largest economy grew at its quickest pace in nearly two years, the latest PMI survey suggested it may have trouble maintaining that momentum. Last quarter’s faster growth, coupled with accelerating inflation, have dramatically changed expectations for the Reserve Bank of India’s monetary policy. It is now expected to change its stance to hawkish as early as a policy review on Wednesday and raise rates in August. A recent surge in the price of oil, India’s biggest import item, and a sharp weakness in the rupee will be inflationary, keeping prices on an up-trend. While the jump in input prices was evident in the latest survey, firms continued to absorb most of the cost pressure to attract dwindling demand, pressuring profit margins. (REUTERS)

Published: 06-06-2018 08:03

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