Purchasing Managers Index (PMI)
The Purchasing Managers Index (PMI), produced by IHS Markit, is a composite indicator designed to provide an overall view of activity in the manufacturing sector and acts as a leading indicator for the whole economy. The data for the index is collected through a survey of 400 purchasing managers in the manufacturing sector on the following five indicators (the weight for each indicator is in brackets):
- New orders (0.3)
- Output (0.25)
- Employment (0.2)
- Suppliers delivery times (0.15)
- Stock of items purchased (0.1) with the Delivery times index inverted so that it moves in a comparable direction.
The Purchasing Managers Index (PMI), produced by IHS Markit, is a composite indicator designed to provide an overall view of activity in the manufacturing sector and acts as a leading indicator for the whole economy. The data for the index is collected through a survey of 400 purchasing managers in the manufacturing sector on the following five indicators (the weight for each indicator is in brackets):
- New orders (0.3)
- Output (0.25)
- Employment (0.2)
- Suppliers delivery times (0.15)
- Stock of items purchased (0.1) with the Delivery times index inverted so that it moves in a comparable direction.
SUBJECT Variables
COMPOSITE PMI
>50 = expansion | <50 = contraction
- The seasonally adjusted IHS Markit India Composite Purchasing Managers' Index (PMI), an indicator of economic health for manufacturing and service sectors, increased to 49.2 in Jul'21 from 43.1 in Jun'21. The headline index remained below the crucial mark of 50 for the third consecutive month, reaching a level last seen in the peak Covid period of Aug'20. A level below 50 signals an overall contraction of the manufacturing and service sectors
- The report by IHS cited worries about possible new waves of COVID-19, virus mutation, partial lockdowns, global shortages of raw materials and supply-chain disruptions restricted business confidence among private sector companies in India during Jul'21.
- Sentiment towards employment turned negative in Jun'21. A net balance of -6% of companies foresee job shedding, amid expectations of weak demand and subdued activity.
- As per the report, confidence regarding capital expenditure was marginally positive during June, with only +1% of companies on balance forecasting growth. While marginal growth of cap-ex was expected, companies intend to trim R&D spending in the year ahead. At -5% in June, the net balance was below zero for the first time in a year. By comparison, the respective readings for the emerging markets and global averages were at +7% and +8%. Service providers were slightly more downbeat than manufacturers.
MANUFACTURING PMI
>50 = expansion of the manufacturing sector | <50 = contraction of the manufacturing sector
- The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI), an indicator of economic health for the manufacturing sector, increased to 55.3 in Jul'21 from 48.1 in Jun'21. A level above 50 signals an overall expansion of the manufacturing sector.
- The report by IHS highlighted that falling new orders, business closures and the COVID-19 crisis triggered a reduction in output among Indian manufacturers. The data in Jul'21 pointed to marked improvement in both pre and post production inventories.
- Demand weakness and a reduction in production requirements led firms to restrict input purchasing in Jun'21. Buying levels fell at a marked pace that was among the fastest seen since Mar'05 leading to job shedding.
- As per the IHS report, input costs increased further in Jun'21, with firms reporting higher prices for chemicals, electronic components, energy, metals and plastics. Additional cost burdens were again transferred on to clients, with goods producers hiking their fees for the tenth straight month.
SERVICES PMI
>50 = expansion of the services sector | <50 = contraction of the services sector
- The seasonally adjusted IHS Markit India Services Purchasing Managers' Index (PMI), an indicator of economic health for the services sector, increased to 45.4 in Jul'21 from 41.2 in Jun'21. The services PMI index remained below the crucial mark of 50 for the third consecutive month. The data in Jul'21 points to business confidence remaining weak. A level below 50 signals an overall contraction of the services sector.
- Based on the Jun'21 data, the report by IHS indicated that services firms endured further losses of new business as the emergence of the pandemic and the reintroduction of containment measures restricted demand. New work intakes and output contracted at the fastest rates since July 2020, which prompted companies to reduce employment again. Business sentiment took another hit, with panelists neutral in their assessments of output forecasts for the year ahead.
- The report further mentioned that business activity and new orders decreased in four out of the five broad areas of the service economy, with the fastest rates of contraction registered in Consumer Services. Transport & Storage was the only segment to post growth. International demand for Indian services deteriorated further in Jun'21, with new export orders falling for the sixteenth consecutive month.
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