By Anant Chandak
BENGALURU (Reuters) - Growth in India's services activity growth slowed to a five-month low in May as robust domestic demand weakened, according to a survey, which also showed exports growing at a record pace and job creation rising to a 21-month high.
The final HSBC India Services purchasing managers' index, compiled by S&P Global, fell to 60.2 last month from April's 60.8, confounding a preliminary reading for a rise to 61.4.
However, it remained above the 50 mark separating growth from contraction for the 34th straight month.
"India's service activity rose at a slightly softer pace in May, with domestic new orders easing slightly, but remaining robust, implying strong demand conditions and successful advertising," noted Maitreyi Das, global economist at HSBC.
Even though the new business sub-index - a key gauge for demand - remained robust in May, it grew at the slowest pace this year due to fierce competition and heat waves across the country hampering livelihood.
However, exports expanded at the steepest pace since the inclusion of the sub-index in the monthly survey nearly a decade ago.
With signs of recovery in China and economic activity remaining resilient in the U.S., the recent pick up in global demand could continue.
Strong sales led the business outlook for the coming 12 months to climb to an eight-month high, encouraging services firms to add jobs at the fastest pace since August 2022.
But price pressures intensified last month from April with input prices outpacing its long-run average and prices charged also quickening slightly.
"Cost pressures ticked up in May led by higher raw material and labour costs. Firms were only able to transfer a part of the price rise to customers," added Das.
That could trigger a resurge in inflation, which has largely eased this year, raising chances the Reserve Bank of India would keep interest rates on hold for a longer period and likely cut in October-December quarter compared with July-September expected earlier.
As business activity in both manufacturing and services eased slightly in May, it meant the overall HSBC India composite PMI output index fell to a five-month low of 60.5 last month from April's 61.5 and below a flash estimate of 61.7.
Sustained growth in both services and factory activity would be key focus areas for the new government elected on June 4 to ensure India continues to hold on to its title as the fastest-growing major economy in the years ahead.
India grew at a better-than-expected pace of 7.8% last quarter.