InvestorQ : Why has the latest Services PMI number come so strong and what does that really indicate?
swati Bakhda made post

Why has the latest Services PMI number come so strong and what does that really indicate?

Sam Eswaran answered.
1 year ago

After the PMI Manufacturing came in at almost the same level as the previous month, the services showed a much sharper recovery in Feb-21 on the back of a domestic pick in the services sector. India's services activity or PMI – Services expanded at the best rate in recent times during the month of Feb-21 even as job creation in the month of February continued to trend lower.

PMI Services figure surged sharply from 52.8 levels in the month of Jan-21 to 55.3 in the month of Feb-21. While a figure above 50 is considered to be expansionary in nature, this surge reflects positive momentum too since the PMI Services is sequentially higher compared to the previous month. In fact, the month of February 2021 marks the 5th consecutive month the PMI Services staying above the 50 levels.

While domestic demand for services led to a surge in new work intake, the export of services were largely restricted by global travel and movement restrictions. This substantially curbed the global demand for services and that stayed under pressure through the month of February. Hence, new export orders fell for the 12th month in succession during February 2021.

If one were to combine the manufacturing and services PMI, then the composite PMI for Feb-21 came in at 57.3 in Feb-21 which compares favourably with 55.8 in Jan-21. However, the Markit report also noted that job creation remains a lot to be desired. Therefore, despite growth in new business during the month of February, service sector employment fell further in Feb-21 and that hints at more job losses in the month.