Services sector expands for a second straight month in March

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Services PMI

Moving away from the contractions related to demonetisation, the services sector maintained a stronger rate of expansion in February, the widely tracked Nikkei’s Purchasing Managers’ Index (PMI) survey showed on Thursday.

PMI for services rose to 51.5 points from 50.3 points in February. A reading above 50 signifies expansion, while one below that shows contraction.

The sector had contracted for three consecutive months till January as business flow failed to recover from the impact of demonetisation. PMI averaged 49.3 points in the third quarter of the financial year; it was at 49.5 points for the first two months of the fourth quarter.

Underpinning the expansion in services activity was a back-to-back rise in new business inflows. As was the case for output, the growth of new work also gathered pace in March. Anecdotal evidence highlighted improving demand conditions. At the same time, factory new orders increased at the strongest rate since last October.

In order to cope with higher workloads, service providers hired additional staff. While employment increased only slightly overall, but to the greatest extent since July 2015, the survey showed.

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