India’s manufacturing sector growth falls to five-month low in March 2018: PMI
According to monthly survey Nikkei India Manufacturing Purchasing Managers Index (PMI), India’s manufacturing sector activity fell to five-month low in March 2018. It felled from 52.1 in February 2018 to five-month low of 51.0 in March 2018 indicating slowest improvement in operating conditions recorded by survey since October 2017.
PMI March 2018 Survey
Manufacturing activity: This is eighth consecutive month that PMI has remained above 50-point-mark. In PMI parlance, reading above 50 indicates growth and below it denotes contraction. March 2018 figure indicates manufacturing activity remained in expansion mode. But five month low indicates that new business orders rose at slower pace and decline in employment as firms showed little appetite for recruitment.
Exports: India’s new export orders rose during March 2018, but on negative note, further advances in trade disputes may potentially weigh on sales to international clients. The impact of US tariffs on steel and aluminium on India is expected to be limited, as India’s exports in both metals to US accounted for less than 0.4% of total merchandise exports.
PMI employment data: Firms have reduced their payroll numbers for first time in eight months, albeit at fractional pace. It gives warning signs in the labour market. Manufacturers operating in consumption and intermediate market groups signaled no appetite for recruitment
Business sentiment: It remained weak, reflecting some concerns regarding business prospects over next 12 months.
Prices front: The recent build-up of inflationary pressures eased in March 2018, with softer increases in both input costs and output prices recorded.
Purchasing Managers’ Index (PMI)
PMI is an indicator of business activity-both in the manufacturing and services sectors. It is a survey-based measure that asks respondents about changes in their perception of some key business variables from month before. It is calculated separately for manufacturing and services sectors and then composite index is constructed.
Implications for economy
PMI is usually released at start of month, much before most of official data on industrial output, manufacturing and GDP growth is made available. It is, therefore, considered a good leading indicator of economic activity. Manufacturing growth measured by PMI is considered good indicator of industrial output.
Categories: Business, Economy & Banking