IN: PMI Manufacturing Index

Mon Nov 30 23:00:00 CST 2015

Actual Previous
Level 50.3 50.7

Indian manufacturing struggled to keep its head above water in November. At just 50.3 the sector PMI was only 0.3 points above its growth threshold and down 0.4 points versus its October outturn. The new reading was also a 25-month low.

New business continued to expand but only just amidst reports of subdued domestic demand. Indeed, order books might have contracted but for the relative buoyancy of exports where growth crept up to a 3-month high. Not for the first time, a rise in backlogs in part just reflected delayed payments by customers and although output was firmer on the month, in line with the headline index its increase was the smallest in more than two years. Employment was essentially flat.

Meantime, price pressures became a little more marked but rises in both input costs and factory gate prices left their respective inflation rates still well below their long-run averages.

Overall today's data warn that the rebound in manufacturing seen in the third quarter should not be taken for granted. The overall softness of the November PMI report suggests that there is more RBI easing in the pipeline even if another cut in official interest rates as soon as today remains unlikely.

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'.