IN: PMI Manufacturing Index

Mon May 04 00:00:00 CDT 2015

Actual Previous
Level 51.3 52.1

Manufacturing activity expanded again in April. However, at 51.3 the PMI was down on its 52.1 reading in March and close enough to the 50 mark to signal only a very modest rate of growth.

Both output and new orders saw smaller rises than at the end of last quarter, the latter mainly reflecting more sluggish domestic demand as overseas markets remained relatively strong. Backlogs were essentially unchanged but employment fell for the second time so far in 2015, albeit only fractionally.

Input costs rose only slightly and failed to prevent factory gate prices from declining for the first time in nearly two years.

Overall the tone to the April report is disappointingly soft and with price pressures easing over the period, speculation about another RBI cut at some point should receive a boost.

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'.