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India's services activity dips in December, but firms step up hiring

FILE PHOTO: A customer walks inside a clothes store at a shopping mall in Kolkata, India, June 20, 2018. Picture taken June 20, 2018. REUTERS/Rupak De Chowdhuri/File Photo

BENGALURU, Jan 4 (Reuters) - Growth in India's services sector slowed slightly in December, but firms hired at a faster clip on continuing optimism as new business and employment remained buoyant, a private survey showed on Friday.

The Nikkei/IHS Markit Services Purchasing Managers' Index declined to 53.2 in December from November's four-month high of 53.7, but remained above the 50 mark threshold that separates growth from contraction for the seventh consecutive month.

Activity among services firms also registered the strongest average quarterly performance during the three months ending December in nearly three years, encouraging firms to hire at a faster pace.

"India's service sector continued to enjoy positive levels of activity in December, with new business and employment remaining on an upward path," said Pollyanna De Lima, principal economist at IHS Markit.

"However, except for jobs, rates of expansion slowed slightly to form a somewhat disappointing end to 2018."

The slowdown in the pace of expansion in India's dominant sector - the services firms - was largely driven by a contraction in foreign demand for the second straight month.

A sub-index tracking overall demand in the sector declined to 52.7 last month from 53.3 in November.

Slower services activity along with weaker growth in the manufacturing sector led the composite index to fall to 53.6 last month from a more than two-year high of 54.5 in November.

However, optimism about future activity in the services sector increased to a three-month high, signaling a strong outlook for the sector this year despite uncertainties around the upcoming general election.

Meanwhile, input costs rose at its weakest pace since May 2017, but prices charged for the provision of services rose again as firms sought to share additional costs with their clients, pushing output prices up by a slightly faster pace.


(Reporting by Indradip Ghosh; Editing by Jacqueline Wong)