Services sector contracts for fourth month in June: PMI

Downturn may spill over into second half, says economist

India’s services sector activity remained in a deep downturn in June as the COVID-19 pandemic curtailed intake of new work orders and disrupted business operations, a monthly survey showed.

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

Services activity contracted for a fourth straight month in June. A print below 50 denotes a contraction, as per the IHS Markit India Services Purchasing Managers’ Index (PMI).

“India’s service sector continued to struggle in June as the country’s coronavirus crisis worsened,” Joe Hayes, Economist at IHS Markit, said in a release on Friday.

Simply put, the country is gripped in an unprecedented economic downturn which is certainly going to spill over into the second half of this year unless the infection rate can be brought under control, Mr. Hayes added.

The number of infections has spiked to 6,25,544, Health ministry data shows.

‘Falling activity’

“A large fraction of the survey panel are still reporting falling activity and order book volumes, reflecting an intensely challenging picture,” Mr. Hayes noted.

According to IHS Markit, the slower rate of decline was reflective of some stabilisation in activity levels, with about 59% of firms reporting no change in output since May. “Only 4% registered growth, while 37% recorded a reduction,” it added.

Meanwhile, total new orders fell at a sharp pace during June, which firms attributed to reduced consumption. In some instances, customers had closed their businesses due to the unfavourable environment. Besides, there was yet another steep drop in export sales.

Employment across the Indian services sector fell during June. Job losses were attributed to lower business requirements, although some companies reported poor staff availability.

The sectors covered in the survey include consumer (excluding retail), transport, information, communication, finance and insurance.

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