The growth in the dominant services industry lost some momentum in November 2020 due to poor demand, according to data from a private survey. The effect on services and manufacturing sectors have clouded hopes of a quick economic recovery amid the COVID-19 crisis. The country slipped into a technical recession as per the gross domestic product (GDP) data of the July-September quarter. After suffering two successive quarters registering economic contraction, the country is expected to recover modestly early next year and will not reach the pre-COVID level soon. The Purchasing Managers’ Index (PMI) declined to 53.7 last month from October’s figure of 54.1. However, it still held well-above the 50-mark separating the growth from contraction for a second consecutive month. (Also Read: COVID-19 Impact: Manufacturing Recovery Declines In November, PMI At 56.3 )
“Output and sales across the private sector have held up well, but there were some signs of growth losing momentum among goods producers and service providers,” Pollyanna De Lima, economics associate director at IHS Markit, said Pollyanna De Lima, economics associate director at IHS Markit. Along with services, the manufacturing recovery also witnessed a sharp decline last month as COVID-19 influenced the output and demand.
According to De Lima, the growth constraints, travel restrictions as well as low footfall as consumers remained to be the key themes of the services PMI. A composite PMI, including both manufacturing and services, declined to 56.3 last month from October’s figure of 58.0. A sub-index tracking the overall demand for services was above 50 for a second month. However, the pace of expansion softened from October 2020. The demand from across the globe, remained firmly in contraction territory as many countries reimposed the COVID-19 lockdown to curb new cases of coronavirus.
Service firms were more optimistic about the year ahead, largely on hopes of a COVID-19 vaccine that would normalise market conditions and end the job shedding streak for businesses. However, both the input costs and prices charged increased in November, indicating that the economy is struggling to pull out of a low growth period and high inflation.
“Low interest rates aimed at mitigating the negative impacts of COVID-19 on the economy and the latest rise in services employment are supportive factors for domestic demand. However, a pick-up in inflationary pressures could threaten the recovery,” De Lima added.