IN: PMI Manufacturing Index

Tue Oct 03 00:00:00 CDT 2017

Actual Previous
Level 51.2 51.2

The Nikkei India Manufacturing PMI's headline index was unchanged at 51.2 in September. The index rebounded to this level in August after dropping sharply in July in response to the introduction of a goods and services tax by the national government.

Stability in the survey's headline index in September reflected modest but offsetting movements in the main components. Both the output and new orders measures showed positive but slightly weaker growth in September compared with August, with the impact of the GST cited as a factor that has continued to weigh on demand. The survey also showed a small drop in new export orders after three months of increases.

Respondents, however, reported improved confidence about the twelve-month outlook for output, suggesting that firms are confident that any disruption caused by the introduction of the GST will be temporary. Reflecting this improved confidence, employment was reported to grown in September at the fastest pace in nearly five years, with the survey now showing that payrolls in the manufacturing sector have increased in three of the last four months.

The survey's measure of input costs growth picked up in September but remains modest and below the long-run average. Respondents also reported only a marginal increase in selling prices.

The Nikkei India Services PMI is scheduled for release later in the week.

The Manufacturing Purchasing Managers' Index (PMI) is a joint publication by Markit and the Nikkei media organisation and provides an estimate of manufacturing business activity for the preceding month. The report uses information obtained from a representative sector survey incorporating around 400 companies in eight broad categories. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting).

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'.