IN: PMI Manufacturing Index

Wed Nov 01 00:00:00 CDT 2017

Actual Previous
Level 50.3 51.2

he Nikkei India Manufacturing PMI's headline index fell from 51.2 in September to 50.3 in October. This is the first decline in the index since it dropped sharply in July in response to the introduction of a goods and services tax by the national government.

The decline in the survey's headline index in October reflected weaker reported output growth, with many respondents citing the ongoing impact of the new tax. New orders were also reported to have been stagnant in October, while the survey indicates that new export orders contracted at the steepest pace since 2013. Respondents also reported less confidence about the twelve-month outlook for output, with the the new tax again cited as a concern. Employment in the sector, however, was reported to have increased for the third consecutive month.

Survey respondents also reported tighter margins in October. The survey's measure of input costs growth picked up to its highest level since May but firms reported that competitive pressures made it difficult to pass on these higher costs to 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'.