Service Sector Boosts Third-Largest Economy Amid Weak Global Demand

Summary

  • Approximately 70% of the country’s GDP is contributed by the service sector, which has shown positive growth in spite of weak global demand hampering manufacturers.
  • The final au Jibun Bank Service purchasing managers’ index (PMI) has increased to 53.1 in January, marking the 17th month of consistent growth, according to S&P Global Intelligence.
  • A rise in business activity was driven by solid demand and a weaker currency, and new export business experienced the first increase since the previous August.
  • The Composite PMI, which is a combination of manufacturing and service activity figures, increased to 51.5 in January from 50.0 in December.

Service Sector Strengthens Economy

The service sector, contributing to around 70% of the nation’s GDP, has emerged as a robust component of the world’s third-largest economy, helping counterbalance the impact on manufacturers due to sluggish global demand.

Growth persists with PMI increase

According to S&P Global Intelligence, the final au Jibun Bank Service purchasing managers’ index (PMI) escalated to 53.1 in January which was previously 51.5 in December, marking its 17th straight month of growth. This growth rate surpassed the initial prediction of 52.7 and stayed above the 50.0 baseline, indicating expansion versus contraction on a monthly basis.

Boost in Private Sector Activity

“An escalation in overall private sector activity was observed for the first time since the previous October due to a surge in services activity growth and a mellower fall in manufacturing,” stated Usamah Bhatti, an economist at S&P Global Market Intelligence.

Growth in Business Activity

Surge in business activity has been attributed to ample demand and a weaker currency. The pace of growth in new business has reached a peak since the last four months.

Export Activity and Price Inflation

New export business saw its first increase since last August, mainly due to a surge in inbound tourist traffic, primarily in air travel. Meanwhile, Input price inflation has touched a three-month high driven by elevated fuel and labor costs. Yet, firms managed to push through some increases, prompting the rate of price increase to be the fastest since last August.

Business Confidence and Composite PMI

Business confidence for the forthcoming 12 months has increased to its firmest level since May. The Composite PMI, a blend of the manufacturing and service activity figures, climbed up to 51.5 in January from a flat 50.0 in December.

These recent economic events could potentially influence trading and forex markets and impact certain assets.

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