IN: PMI Manufacturing Index

Tue Feb 27 23:00:00 CST 2018

Actual Previous
Level 52.1 52.4

The Nikkei India Manufacturing PMI's headline index fell from 52.4 in January to 52.1 in February. This is the second consecutive fall in the index after it reached a five year high in December, but it remains above levels recorded over most of 2017 and continues to indicate that conditions in the manufacturing sector have been solid early in the year.

This fall in the survey's headline index relative to January reflects weaker but still positive reported growth in output, new orders, and new export orders. Respondents, however, reported slightly stronger growth in payrolls in February and remain optimistic about the twelve-month outlook for output.

Today's survey indicates that price pressures picked up in February after official data showed a small drop in headline consumer inflation in January. The survey's measure of input costs picked up to its highest level in a year, with respondents citing higher prices paid for steel, chemicals and fuel. Respondents also reported increasing their selling prices for a seventh consecutive month and at the fastest pace since last February.

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'.