IN: PMI Manufacturing Index

Mon Jun 01 00:00:00 CDT 2015

Actual Previous
Level 52.6 51.3

Manufacturing activity picked up a little momentum in May. At 52.6 the headline index was 1.3 points stronger than in April and at a 4-month high.

Output growth saw its fastest rate since January reflecting broad-based increases in consumer and capital goods as well as in intermediates. New orders expanded for a nineteenth consecutive month and also at their most robust pace since the start of the year. Within this, overseas demand slowed somewhat implying a particularly good period for the domestic market. Even so, the sector's headcount was little changed from the beginning of the quarter.

Meantime, input costs were up on the month but inflation remained historically soft and factory gate prices were only marginally firmer than last time.

Overall today's report is moderately upbeat but not to the extent that would undermine speculation about another 25 basis point cut by the RBI tomorrow.

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'.