India's services activity stayed in deep contraction in June: PMI

Marco Green
July 3, 2020

'However, lockdown measures continued to hold back travel and leisure, while companies across all main categories of service activity commented on subdued underlying business and consumer spending in the wake of the COVID-19 pandemic'. Any reading above 50 indicates expansion, and analysts said the strong performance by China's service sector, which accounts for about 60% of the economy, suggested that the new outbreak of Covid-19 in Beijing had little impact on the country's recovery.

"India's service sector continued to struggle in June as the country's coronavirus crisis worsened", Joe Hayes, an economist at IHS Markit, said in a release.

The IHS Markit India Services Business Activity Index was at 33.7 in June, up from 12.6 recorded in May.

The Caixin/Markit services Purchasing Managers' Index (PMI) rose to 58.4, the highest reading since April 2010, from May's 55.0, pulling further away from the trough hit in February as the coronavirus lockdown paralysed the economy. Bloomberg, meanwhile, reported that China's non-manufacturing PMI rose to 54.4. Although the rate of deflation eased considerably, it was historically marked.

"Since mid-March, China's economy has staged an impressive comeback, bolstered by pent-up demand, a catch-up in production, a surge in medical product exports and stimulus in both China and other major economies that has bolstered demand for goods made in China", economists at Nomura International (Hong Kong) Ltd. wrote in a note on Monday. "This reflects the much more cautious approach of the Irish authorities to lifting lockdown restrictions compared to elsewhere", he said.

Volume of outstanding business signaled a further reduction in June and the rate of backlog depletion eased to the slowest in three months. Besides, there was yet another steep drop in export sales.

On the price front, many service sector companies said they had been offering customers discounts last month, with outgoings largely unchanged.

Duncan Brock, group director at the the Chartered Institute of Procurement & Supply (CIPS), a global procurement and supply organisation, said that "though the sector remained in overall contraction territory, the re-opening of businesses premises unclogged levels of dampened demand and created hope that the worst impact of the pandemic could be over". "The heightened risk of a protracted recession was commonly noted by pessimistic firms", IHS Markit added. They raised their estimate for year-on-year GDP growth for the second quarter this year to 2.6%, up from 1.2%.

Although improved from May, sub-indexes showed domestic and foreign demand continued to decline sharply leading firms to cut jobs for the fourth straight month in June.

Other reports by Click Lancashire

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