India's services PMI slips to 17-month low in June as demand and hiring cool

India's services sector lost momentum in June, with growth slowing to a 17-month low as softer domestic demand weighed on new business and hiring, according to the latest purchasing managers' survey.

The HSBC India Services Purchasing Managers' Index (PMI), compiled by S&P Global, eased to 57.4 in June from 59.8 in May, though it came in marginally above the flash estimate of 57.3. A reading above 50 indicates expansion in business activity.

The slowdown was driven by weakening domestic demand, with new business growth easing to its weakest pace since November 2023, signalling a loss of momentum in India's largest economic sector.

"The loss of momentum points to more challenging market conditions and weaker demand, particularly at home," said Pranjul Bhandari, Chief India Economist at HSBC.

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However, overseas demand remained relatively resilient, with new export orders rising at their fastest pace in three months, partially cushioning the slowdown in domestic business.

The moderation in demand also hit hiring activity. Employment growth nearly stalled in June, with only about 1% of surveyed firms reporting an increase in staff, marking a sharp slowdown from the robust recruitment seen in April and May.

On the inflation front, input cost pressures continued to ease. Input cost inflation softened to a five-month low, helped by slower increases in electricity, fuel, food and transportation costs. Businesses also passed on fewer cost increases to customers, with selling price inflation slowing to a seven-month low.

Business confidence weakened for the fifth consecutive month, slipping to its lowest level in five months. Survey participants cited rising competition, challenging economic conditions and the depreciation of the rupee as key concerns, alongside uncertainty surrounding global trade and financial market volatility.

The broader private sector also showed signs of moderation. The HSBC India Composite PMI, which combines manufacturing and services, slipped to its weakest level since March as growth in output, new orders and employment softened across the economy, while overall business optimism continued to decline.