Prices charged for the provision of services in India rose again at the year-end, as firms sought to share an additional cost burden with their clients. Despite being the highest in three months, the rate of output price inflation was marginal. Factory gate charges, meanwhile, changed little.
Cost inflation at services firms softened for the third consecutive month to its weakest since May 2017. With purchasing prices in the manufacturing industry increasing at a slower pace, aggregate cost inflation was weakest in over two years, but service providers continued to report rising costs, especially for food and fuel.
"Services companies took a breather from rising expenses as cost inflation eased to a 19-month low. This softening enabled firms to hire extra staff to a greater extent, while hiking their charges only marginally. In turn, subdued inflationary pressures and cooling economic growth add some support for a rate cut early next year," Pollyanna De Lima, principal economist at IHS Markit, and author of the report, said.
Advertising efforts, new service offerings and predictions of an improvement in market conditions after the elections boosted business sentiment. Furthermore, the level of confidence was the highest in three months. In comparison, optimism among goods producers moderated from the mid-quarter.
The Nikkei India Composite PMI Output Index, which maps both the manufacturing and services sectors, was down from a 25-month high of 54.5 in November to 53.6 at the end of the year.