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India's services sector slump stretched into May - PMI

Tables are seen lying on each other in a restaurant which is closed during an extended nationwide lockdown to slow down the spread of the coronavirus disease (COVID-19), in New Delhi

By Vivek Mishra

BENGALURU (Reuters) - India's enormous services industry endured another month of devastating contraction in May as the coronavirus brought activity to a near halt, causing steep job losses and cementing fears of a deep recession, a survey showed on Wednesday.

Although the Nikkei/IHS Markit Services Purchasing Managers' Index crawled up to 12.6 in May from April's all-time low of 5.4 it remained a long way from the 50-mark separating growth from contraction. It was just below 50 in March.

The last time it contracted for three consecutive months was from November 2016 following the ban of high-value currency notes, which severely hurt consumption.

The lockdown of India's 1.3 billion people, which started on March 25, has been extended in some areas until the end of June as domestic coronavirus cases reported approached 200,000 with more than 5,500 deaths recorded.

"Given the stringency of the lockdown measures imposed in India, it is no surprise to see the severity of the declines in April and May," Joe Hayes, an economist at IHS Markit, said in a release.

"Demand for services, both domestically and overseas, continued to plummet in May as clients' businesses remained closed and footfall remains drastically below normal levels."

Although slightly improved from April sub-indexes tracking domestic and foreign demand remained perilously close to zero, leading firms to reduce their workforce at the second sharpest pace since the survey began late 2005. It has only been faster in April.

The outlook gave little hope for an imminent turnaround with firms reporting record low levels of confidence about the next 12 months.

A composite PMI, which includes manufacturing and services, also signalled a severe contraction in Asia's third-largest economy.

"With economic output set to fall enormously in the first half of 2020, it is clear that the recovery to pre-COVID-19 levels of GDP is going to be very slow," IHS Markit's Hayes wrote.

(Reporting by Vivek Mishra; Editing by Sam Holmes)