India’s services sector contracted for the third consecutive month in July, with new job losses for the eighth straight month, as per the Purchasing Managers’ Index (PMI) which stood at 45.4 in the month, marginally better than the 41.2 recorded in June.

Business activity, new orders and employment declined further but in all cases rates of contraction moderated from June. Looking ahead, firms were pessimistic about the 12-month outlook for output for the first time in a year. The latest data also pointed to an intensification of inflationary pressures across the sector. Posting 45.4 in July, the seasonally adjusted India Services Business Activity Index was in contraction territory for the third month in a row.

However, rising from 41.2 in June, the latest reading pointed to a slower rate of reduction. Panel members that reported lower output cited subdued demand conditions amid the Covid-19 crisis. New work intakes also fell for the third month running in July despite a softer pace than in June. New business from abroad decreased at a sharp pace that was little changed from June. Consumer services was the worst-affected segment, noting the quicker declines in new orders and output out of the four categories for which contractions were recorded.

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