India’s services industry moderated in October for a third straight month after the central bank’s record interest-rate increases.
The Purchasing Managers’ Index fell to 49.1 from 49.8 in September, HSBC Holdings Plc and Markit Economics said in an e-mailed statement today. Readings above 50 indicate expansion.
The Reserve Bank of India last week signaled it may pause the tightening cycle to support growth as Europe struggles to resolve its debt crisis. In China, non-manufacturing industries grew at a slower pace in October, according to the China Federation of Logistics and Purchasing, giving that nation’s policy makers scope to ease monetary or fiscal policy.
“The momentum in the services sector eased further in October with business activity declining sequentially and new orders expanding at a slower clip,” said Leif Eskesen, a Singapore-based economist at HSBC. “Today’s reading reinforces RBI’s inclination to pause at the December meeting.”
The yield on the 7.80 percent government bond due April 2021 was little changed at 8.89 percent as of 11:02 a.m. in Mumbai. The BSE India Sensitive Index fell 0.6 percent. The rupee weakened 0.3 percent to 49.32 against the dollar.
Governor Duvvuri Subbarao has increased the central bank’s repurchase rate by 375 basis points since mid-March 2010 to tame inflation that has exceeded 9 percent since the start of December. That’s the fastest round of increases since the central bank was established in 1935, Bloomberg data show. The repurchase rate is 8.5 percent.
Growth in services such as banking and air travel is showing signs of waning. Commercial loans given by banks such as ICICI Bank Ltd. rose 19.45 percent as of Oct. 7 from a year earlier, less than the 21.42 percent gain in the previous week.
Passengers travelling by airlines including Jet Airways Ltd. and Spicejet Ltd. dropped 4.7 percent in August compared with the previous month, according to the Airports Authority of India.
The Reserve Bank said Oct. 25 that the 13 rate increases since mid-March 2010 would moderate economic growth and help ease inflation. It cut India’s growth forecast to 7.6 percent from 8 percent for the fiscal year ending March 31, and reiterated benchmark wholesale-price inflation would slow to 7 percent by March 31.
India’s inflation will start to decline from December and ease to 7 percent by March before moderating further in the first half of the new fiscal year starting April 1, according to the central bank. Beyond December, “if the inflation trajectory conforms to projections, further rate hikes may not be warranted,” the bank said last week.
Officials from China to South Korea have refrained from raising rates in recent weeks as Europe’s debt crisis dims the outlook for exports.
In China, a PMI for non-manufacturing index, fell to 57.7 from 59.3 in September, the China Federation of Logistics and Purchasing said on its website today.