IN: PMI Services Index

Thu Apr 05 00:00:00 CDT 2018

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Level 50.3 47.8

The Nikkei PMI survey for India's services sector indicates that conditions rebounded in the sector in march, with the headline business activity index increasing 50.3 from to 47.8 in February. The headline index for the Nikkei Manufacturing PMI survey, published earlier in the week, fell from 52.1 in February to 51.0 in March. Together, these moves resulted in the composite index increasing from 49.7 to 50.8.

The increase in the service sector headline index reflects renewed growth in new orders after these were reported to have fallen in February. The manufacturing survey showed weaker but still positive growth in new orders in March. This divergence between the two seconds was also evident in hiring, with service sector respondents reporting they added staff at the fastest pace since 2011 but manufacturers reporting a drop in payrolls for the firs time in eight months.

Input costs were reported to have risen at a slower pace in March in both the services and manufacturing sectors, with respondents to both surveys also reporting weaker increases in selling prices after strong hikes the previous month.

The improvement in conditions reported in the March survey suggests that the sharp drop in service sector activity indicated by the PMI survey in February reflected temporary factors. The Reserve Bank of India will announce its policy decision later today, with the inflation outlook likely to remain the main focus for officials.

The Services Purchasing Managers' Index (PMI) is a joint publication by Markit and the Nikkei media organisation and provides an estimate of business activity in private sector services for the previous month by using information obtained from a representative sector survey incorporating around 800 companies. 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 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 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.

The Purchasing Managers' Index (PMI) survey methodology has developed an outstanding reputation for providing the most up-to-date possible indication of what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices. The indices are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.