India: Composite PMI creeps up in May but remains downtrodden
June 3, 2020
The composite Purchasing Managers’ Index (PMI) produced by IHS Markit inched up to 14.8 in May from 7.2 in April; the reading in April thus continues to mark the lowest point since current records began in December 2005. A reading below 50 indicates a decrease in business activity since the previous month. May’s PMI result likely came on the back of a modest easing of the national lockdown that has been imposed since the end of March and is aimed at arresting the spread of coronavirus.
The manufacturing PMI climbed to 30.8 in May from 27.4 in April, largely due to slower decreases in new orders and output; however, despite these slowdowns, the rate of job cutting accelerated in May from the previous month to hit a series high. Meanwhile, goods producers cut back on their input purchases again, although at a slower rate than in April. In terms of prices, input costs and output charges both fell at a slower paces in May. Regarding the outlook, optimism regarding business activity among manufacturers over the coming 12 months moderated.
On the services side, the PMI climbed to 12.6 in May from 5.4 in April. The improvement was in part due to a slower rate of decline of output, although the rate was once again very sharp. Meanwhile, new orders continued to plunge in May; specifically in terms of demand from abroad, 95% of companies reported a decrease. Despite many service providers closing down in May, interrupting the completion of work, backlogs of work fell. With demand suppressed, jobs continued to be axed, although the rate of job shedding moderated from April. An additional factor weighing on employment levels in May was business confidence, which fell to the lowest point ever since the current series began in December 2005. Regarding prices, input prices fell at the fastest pace on record in May, while the decline in output prices slowed somewhat.
Author: Edward Gardner, Economist