In spite of rising cost of production following rising raw material prices, services sector activity improved with strong demand in March. However, the cost of production in the region has reached an 11-year high. S&P Global India’s Services PMI index rose to 53.6 in March, from 51.8 in February. The PMI of the services sector has remained above 50 for the last eight months.
The war in Ukraine has increased the challenges in the supply chain. As a result, inflation has increased throughout the Indian service economy. Production costs hit an 11-year high at the end of March. However, this has not put a brake on the recovery. Consumer confidence increased after the easing of Kovid-19 restrictions. Service providers have received significant new orders in 2022.
Sales and activity are set to expand rapidly. The increase in the cost of production reached an 11-year high in 2021-22. Business confidence has declined. Services sector growth is expected to slow down in the near future. Most of the manufacturing units are reducing production due to rising input cost.
Inflation may dampen service outlook
The growth-driven trading outlook may decline in the face of rising inflation risks. The sentiments of service companies are currently full of uncertainties. March saw a decline in new jobs. Which undermines business confidence.
Companies willing to spend on consumers, despite rising prices
, 2022 saw the fastest ever recovery in sales and production. Consumers are willing to spend despite rising inflation coupled with easing of COVID restrictions and optimism of wage hikes. Poliana de Lima, Associate Director of Economics, S&P Global