India services activity rebounds in June

Activity in India's service industry rebounded in June from a mild contraction the prior month, a private survey showed, expanding at its quickest pace in a year on the back of a surge in new business orders.

The Nikkei/IHS Markit Services Purchasing Managers' Index climbed to 52.6 last month, its highest since June 2017, from 49.6 in May. The 50-mark separates growth from contraction.

The recovery in services firms' activity, along with a robust pace of manufacturing growth reported on Monday lifted the composite PMI to 53.3, its highest level since October 2016.

That points to a solid finish for the three months ending in June, the first quarter of this fiscal year, after Asia's third-largest economy grew at its quickest pace in nearly two years in January-March.

“Encouragingly, the latest performance was the strongest seen in a year, against a backdrop of improving demand conditions, as evidenced by the fastest gain in new business since last June,” said Aashna Dodhia, an economist at IHS Markit A strong improvement in demand also encouraged firms to hire at a faster pace than in May.

A sub-index that tracks growth in output prices fell to its lowest level in more than a year, even as the rise in input costs slowed just marginally. “Overall input costs rose at the strongest rate since July 2014, and amid a weak rupee and higher oil prices, inflation may remain elevated,” added Dodhia.

Retail inflation in May accelerated to a four-month high and has more or less cemented views that the Reserve Bank of India to tighten policy again this year, and perhaps as early as August.c