Slow Rise in Production: PMI

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According to a recent survey, the Purchasing Managers’ Index (PMI) results for April 2021 showed a slowdown in rates of growth for new orders and output, both of which eased to eight-month lows amid the intensification of the Covid-19 crisis.

Major Highlights

• The seasonally adjusted India Manufacturing PMI was at 55.5 in April, little changed from March’s reading of 55.4.
• India’s manufacturing sector activity was largely flat in April.
• The surge in Covid-19 cases could dampen demand further when firms’ financials are already susceptible to the hurdle of rising global prices.
• On the prices front, there are signals of a steep increase in input costs, the quickest since July 2014, and upward revisions to selling prices.
  • April saw the steepest increase in input costs for nearly seven years drive the sharpest upturn in output charges since October 2013.
• Output and sales increased at the slowest rates since August 2020 due to an intensification of the Covid-19 crisis but there was a faster upturn in international orders.
• New export orders increased for the eighth consecutive month in April and at the fastest rate since October 2020 due to a pick-up in international demand for Indian goods.
• On the job front, although manufacturing employment continued to fall, the rate of contraction recorded in April was marginal and the weakest in the current 13-month sequence of job shedding.

Purchasing Managers’ Index

• It is an indicator of business activity both in the manufacturing and services sectors.
• The data is calculated separately for the manufacturing and services sectors and then a composite index is constructed.
• It is a survey-based measure that asks the respondents about changes in their perception of some key business variables from the earlier month.
  • It is derived from a series of qualitative questions usually released at the start of the month.
• It aims to provide information about current and future business conditions to company decision-makers, analysts and investors.
• It is compiled by IHS Markit for more than 40 economies worldwide.
  • IHS Markit is a London based global leader in information, analytics and solutions for the major industries and markets that drive economies worldwide.
• It is indicated by a number from 0 to 100.
  • A print above 50 means expansion while a score below 50 denotes contraction.
  • A reading at 50 indicates no change.
  • If the previous month PMI is higher than the current month PMI, it represents that the economy is contracting.
• Difference from Index of Industrial Production (IIP)
  • IIP shows the growth rates in different industry groups of the economy in a fixed period of time.
  • It is prepared by the Central Statistical Organisation (CSO) under the Ministry of Statistics and Programme Implementation whereas PMI is compiled by IHS Markit.
  • IIP covers the broader industrial sector compared to PMI & shows the change in production volume in major industrial sub-sectors like manufacturing, mining and electricity.
  • PMI is more dynamic compared to a standard IIP.

Source: TH