IN: PMI Manufacturing Index

Thu Apr 02 00:00:00 CDT 2015

Actual Previous
Level 52.1 51.2

Manufacturing activity extended its upward trend into March. At 52.1, the sector PMI was up 0.9 points versus its February level and so indicative of a slightly faster pace of growth than in mid-quarter.

Output rose for a seventeenth consecutive month and also at a more rapid pace than in February. The improvement here was broad-based with fresh gains in consumer, intermediate and investment goods and a pick-up in new orders pointed to further gains this month. Reflecting this, the quantity of purchases increased at its strongest rate since December and employment stabilised after a decline last time.

However, inflation news was not so promising with input costs rising more steeply than in any month since last August and factory gate inflation hitting a four month high. Backlogs were also up for a thirty-second straight month, indicating more pressure on capacity utilisation.

Overall today's results are quite positive for Indian manufacturing. Even so, March's headline was still short of January's 52.9 and the first quarter average was down on the fourth quarter mean. This suggests room for fresh RBI rate cuts in due course but the increase in inflationary pressures may encourage the central bank to err on the cautious side for now.

Purchasing Managers' Manufacturing Index (PMIs) is based on monthly questionnaire surveys of selected companies which provide an advance indication of what is really happening in the private sector economy by tracking changes in variables such as output, new orders, stock levels, employment and prices across the manufacturing sectors.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic survey data such as the Markit PMIs, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.

The Markit PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.

The HSBC India Manufacturing PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 500 manufacturing companies. The panel is stratified geographically and by Standard Industrial Classification (SIC) group, based on industry contribution to Indian GDP. Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the 'Report' shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the 'diffusion' index. This index is the sum of the positive responses plus a half of those responding 'the same'.