December PMI data: Services growth cools down to 11-month low; hiring momentum weakens at year end

India’s services sector lost momentum at the end of 2025, with growth moderating in December as incoming demand softened and companies held back on hiring, according to a monthly survey released on Tuesday. The seasonally adjusted HSBC India Services PMI Business Activity Index declined to 58.0 in December from 59.8 in November, marking the slowest pace of expansion in 11 months and the weakest reading since January. Under PMI methodology, a reading above 50 indicates expansion, while one below 50 signals contraction. The survey showed that both new business inflows and output growth moderated during the month. While service providers continued to operate in expansion territory, the overall pace of growth slowed noticeably. Companies remained optimistic about future prospects, but business confidence weakened, with sentiment falling to its lowest level in nearly three-and-a-half years. “While India's service sector continued to perform well in December, the retreat in several survey indicators as 2025 ended may suggest a moderation in growth heading into the new year,” Pollyanna De Lima, economics associate director at S&P Global Market Intelligence said. At the same time, external demand remained a bright spot. Firms reported another improvement in overseas orders, supported by stronger demand from Asia, North America, the Middle East and the UK. New export orders rose at a marked pace during the month. Price pressures across the services sector stayed subdued, with the survey pointing to benign increases in both input costs and output charges. “What bodes well for the outlook is the benign inflation environment. If services firms continue to see only mild increases in their expenses, they should be better positioned to compete and limit price hikes, thereby boosting sales and creating more jobs,” Lima said. Looking further ahead, services companies expressed confidence about a rise in business activity in 2026. However, positive sentiment declined for the third month in a row and reached its lowest level in close to three-and-a-half years, amid growing market uncertainty and concerns over exchange rate movements. “Companies did express some anxiety about market uncertainty and exchange rate movements. While recent rupee weakness may have driven import costs higher, it likely made exports more competitive. Notably, against the wider trend of slowing growth, services exports rose to a greater extent in December,” Lima added. The slowdown was also visible across the broader private sector. Private sector output growth slipped to an 11-month low in December, with the HSBC India Composite PMI Output Index falling to 57.8 from 59.7 in November, its weakest level since January 2025. The decline reflected slower activity at both manufacturing firms and service providers. Composite PMI indices are calculated as weighted averages of manufacturing and services PMI readings, with the weights based on the relative size of the two sectors using official GDP data. At the composite level, India’s private sector continued to record mild increases in input costs and output prices. Hiring activity, however, stalled in December, as growth among goods producers slowed and service providers recorded marginal job shedding. Despite these headwinds, private sector firms remained optimistic about growth prospects, although overall sentiment slipped to a 41-month low, the survey said.