December PMI Report: Services Sector Growth Hits 11-Month Low as Hiring Momentum Slows at Year-End
India’s services sector experienced a notable slowdown at the close of 2025, with growth easing in December as demand weakened and hiring slowed. According to a recent monthly survey, the HSBC India Services PMI Business Activity Index fell to 58.0 in December from 59.8 in November, marking the slowest growth rate in nearly a year. While the sector remains in expansion territory, the decline in new business inflows and output growth raises concerns about future performance. Despite this, firms reported an increase in overseas orders, particularly from regions such as Asia and North America.
Decline in Business Activity Index
The HSBC India Services PMI Business Activity Index, a key indicator of the sector’s health, dropped to 58.0 in December, indicating a deceleration in growth. This figure represents the lowest expansion rate since January 2025. Under the PMI methodology, a score above 50 signifies growth, while a score below indicates contraction. The survey highlighted a noticeable slowdown in both new business inflows and overall output growth during December. Although service providers continued to operate in expansion territory, the decline in growth rates has raised concerns about the sector’s momentum as it heads into the new year.
Weakened Business Confidence
Despite the ongoing expansion, business confidence among service providers has weakened significantly. The sentiment index fell to its lowest level in nearly three-and-a-half years, reflecting growing concerns about market uncertainty and exchange rate fluctuations. Pollyanna De Lima, an economics associate director at S&P Global Market Intelligence, noted that while the service sector performed well in December, the retreat in several indicators may suggest a moderation in growth as 2026 approaches. Companies expressed optimism about future business activity, but the declining sentiment indicates a cautious outlook amid external challenges.
External Demand Remains Strong
On a positive note, external demand for Indian services showed resilience, with firms reporting an increase in overseas orders. This growth was particularly driven by stronger demand from regions such as Asia, North America, the Middle East, and the UK. The survey indicated that new export orders rose significantly during December, providing a bright spot in an otherwise slowing domestic market. Additionally, price pressures within the services sector remained subdued, with only mild increases in input costs and output charges. This benign inflation environment could position service firms to compete effectively and potentially create more jobs in the future.
Broader Private Sector Slowdown
The slowdown in the services sector was mirrored in the broader private sector, where output growth fell to an 11-month low. The HSBC India Composite PMI Output Index decreased to 57.8 in December from 59.7 in November, reflecting slower activity across both manufacturing and service sectors. The decline in growth rates was accompanied by stalled hiring activity, with some service providers even reporting marginal job losses. Despite these challenges, private sector firms maintained a degree of optimism regarding future growth prospects, although overall sentiment reached a 41-month low, indicating a cautious outlook as the new year begins.
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