New hiring up after nine-month lull; Indian companies see demand recovery as pandemic recedes, says IHS Markit

The services sector continued to expand in September, though at a slower rate, as the purchasing managers’ index (PMI) fell to 55.2 from 56.7 in August. However, the good news is there was new recruitment after a nine-month gap.

This is in contrast to manufacturing PMI, which rose to 53.7 in September from 52.3 in August.

Rise in business activity

Commenting on the latest survey results, Pollyanna De Lima, Economics Associate Director at IHS Markit, said Indian companies continued to benefit from a recovery in demand as the pandemic receded further and restrictions were lifted. The improved market environment meant firms managed to secure new work and increase business activity during September.

 “Signs from forward-looking indicators were mixed. Employment returned to growth territory, posting the first rise since the onset of the pandemic, suggesting that the rebound in demand is expected to be sustained and that further increases in business activity are in the pipeline. At the same time, there was another decline in outstanding business. This implies that companies still have spare capacity to accommodate for rising sales and hint that the recovery in employment is by no means guaranteed to continued,” she said.

Explaining the job trend further, the report said the increase in employment ended a nine-month sequence of job shedding, but was marginal overall, as some panellists indicated having a sufficient workforce. The September data pointed to spare capacity among services companies, with outstanding business volumes declining for the second month in a row.