Services PMI Hits 14-Month Low In March Amid Rising Costs, Global Uncertainty

Growth Moderates but Remains in Expansion Zone The Services PMI Business Activity Index declined to 57.5 in March from 58.1 in February, marking the slowest expansion in over a year. However, the index remained above its long-run average of 54.4, indicating continued growth. A PMI reading above 50 shows expansion in activities while a score below it reflects contraction. The slowdown was largely attributed to softer growth in new business orders, impact of the Middle East conflict on demand and tourism and challenging domestic market conditions. Domestic Demand Weakens, Exports Shine While overall new business growth eased to its slowest pace since January 2025, international demand showed strong resilience. Export orders grew at a near-record pace. Demand was reported from Africa, Asia, Europe, the Americas, and the Middle East. Growth in foreign sales was among the strongest since data collection began in 2014. March saw a sharp rise in input costs, the steepest increase since June 2022, driven by higher prices of food items such as chicken, eggs, fruits, and vegetables, fuel and electricity and labour costs. This pushed selling price inflation to a seven-month high, with firms partially passing on costs to customers while absorbing some pressures. Among sectors, consumer services recorded the fastest rise in input costs, finance insurance saw the strongest increase in output charges. Employment and Confidence Improve Despite slower growth, the sector showed positive trends. Job creation rose for the third consecutive month, at the fastest pace since mid-2025. Business confidence strengthened to a near 12-year high, supported by expectations of improved demand, better marketing, and customer engagement Composite PMI Signals Broader Slowdown The HSBC India Composite PMI, which combines manufacturing and services, fell to 57.0 in March from 58.9 in February, indicating the slowest overall private sector growth in nearly three-and-a-half years. Key trends include growth slow down in both manufacturing and services, overall sales expanded at the weakest pace since November 2023 and cost pressures across the private sector hit a near four-year high. Key Takeaway While India’s services sector continues to expand, the latest data signals emerging headwinds from rising costs, global uncertainty, and weaker domestic demand, even as strong export performance and improving business sentiment provide some cushion. The March PMI data highlights a two-speed recovery, robust global demand supporting exports, but domestic pressures and inflation weighing on overall growth momentum. (KNN Bureau)