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In what could dash hopes of economic recovery in the second half of this financial year, services growth fell to a 13-month low in November after registering a six-month low the previous month, shows the HSBC Purchasing Managers’ Index (PMI).
Services (including construction) constitutes a little over 60 per cent of GDP. The PMI in November (the figures were released today) stood at 52.1 points against 53.8 in October, as new business grew at a slower pace, partly reflecting the fewer working days due to Diwali, according to Markit Economics, a financial information agency which compiles PMI data. A reading over 50 points shows expansion; below this denotes contraction.
The PMI figure for manufacturing was at a five-month high in November, at 53.7 points. However, services dragged down the Composite Output Index to a 12-month low of 53.2. If the slowing in PMI services sustains and matches the official numbers of the tertiary sector in the ongoing quarter, all theories of “green shoots of economic recovery” for the second half may be belied, economists said.
Anis Chakravarty, senior director, Deloitte, said the slowing of services, as indicated by the PMI, was believable as it was keeping on with the second-quarter trend. Services hasn’t grown significantly high in recent quarters but it was this sector which provided support to GDP growth, as industry slowed.
In the second quarter ended September, services expanded by 7.1 per cent, whereas industry grew just 1.16 per cent. This enabled the economy to grow by 5.3 per cent in the quarter, matching the expansion in January-March of 2011-12, a three-year low.
PMI is a month-on-month calculation, so it does not show the base effect. In September and October last year, PMI services showed contraction. The sector performed much better than manufacturing in the PMI for the first two quarters of this year. Manufacturing averaged 54.9 points in the first quarter and fell to 52.8 in the second. Services PMI went up from 53.9 points in Q1 to 55 points in Q2.