India’s service sector contracted sharply in June as the emergence of the pandemic and the reintroduction of containment measures restricted demand, survey data from IHS Markit revealed on Monday.
The services Purchasing Managers’ Index fell unexpectedly to 41.2 in June from 46.4 in May. Economists had forecast the index to rise to 48.0.
A reading below 50.0 indicates contraction in the sector. The index signaled the fastest pace of contraction in activity since July 2020.
Subdued demand conditions resulted in a second successive monthly drop in new [business][1] received by services firms. Foreign demand deteriorated further in June, with new export orders falling for the sixteenth consecutive month.
In line with falling demand, companies reduced payroll numbers in June.
On the price front, the survey showed that higher transportation and material costs continued to push-up average input prices. But the pace of inflation was at a five-month low. Services companies continued to share rising cost burdens with clients by lifting their selling prices in June.
Services firms were neutral in their expectations for output in the coming 12 months. The overall level of business sentiment was down for the third month in a row in June, reaching its lowest mark since last August.
The overall private sector [economy][2] shrank at the sharpest rate since July 2020. The composite output index fell to 43.1 in June from 48.1 in May.
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