Manufacturing PMI rises to 52.2 in September 2018

According to Nikkei India Manufacturing Purchasing Managers Index (PMI), manufacturing activity improved in September 2018 on the back of stronger gains in new orders, output, and employment. The monthly PMI grew to 52.1 in September 2018 from 51.7 in August 2018. A reading over 50 on this survey-based index indicates expansion, anything below it reflects contraction.

Key Facts

The significant driver of growth in activity in September 2018 was growth in new orders. This strong growth was linked to gains in both domestic and foreign demand. The export sales has strengthened with net gain and best recorded since the start of the year. Moreover, high product quality was noted as factor supporting total new order book growth. However, the main concern is stronger US dollar compared to rupee as it continued to raise relative price of goods such as steel and fuel, thereby raising input costs for manufacturers.

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. The index figure above 50 denotes expansion in business activity and anything below 50 denotes contraction. 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.

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