India's services sector grew at faster pace in September, optimism at nine-year high

BENGALURU, Oct 5 (Reuters) - Growth in Indias dominant services industry accelerated in September as already robust demand strengthened, according to a survey that also showed businesses were the most optimistic in over nine years.

That bodes well for Asias third-largest economy, which is expected to be the fastest-growing major economy this fiscal year, defying a global slowdown trend.

S&P Globals India services purchasing managers index (INPMIS=ECI) rose to 61.0 last month from 60.1 in August, confounding expectations in a Reuters poll for a dip to 59.5.

The reading was above the 50-mark separating growth from contraction for a 26th consecutive month.

\“The latest PMI results brought more positive news for Indias service economy, with September seeing business activity and new work intakes rising to one of the greatest extents in over 13 years,\” noted Pollyanna De Lima, economics associate director at S&P Global.

\“Besides demand strength domestically, firms noted higher international sales to Asia, Europe and North America.\”

While the new business sub-index - a key gauge of demand - rose slightly to 61.2 last month, export growth eased to the slowest pace since June but remained in expansionary territory for an eighth consecutive month.

That improved business sentiment about the coming 12 months to its highest since June 2014. Job creation also stayed solid, with firms continuing to hire for a 16th straight month.

In an indication that a recent rebound in inflation could be transitory, input prices rose at the slowest pace since March and the prices charged index eased to a six-month low as companies refrained from raising fees too sharply to try and gain new customers.

\“News on prices was also encouraging. Services charges rose at a softer rate as cost pressures receded to one of the lowest in two-and-a-half years,\” added De Lima.

\“Although the latter indicates that near-term output price inflation may cool, worries about potential fluctuations in food prices due to El Nino means the RBI is highly unlikely to cut rates until early next year.\”

The Reserve Bank of India will keep its interest rate on hold at 6.50% until at least April before making a quarter-point cut in the second quarter, a recent Reuters poll found, around the time when global peers are also expected to start easing monetary policies.

With manufacturing activity expanding at the slowest pace in five months but services industry growth robust, the overall S&P Global India Composite PMI Output Index rose slightly to 61.0 in September from 60.9.