India: Composite PMI retreats from July's 21-month high in August
September 5, 2018
The composite Purchasing Manager’s Index (PMI), produced by Nikkei and IHS Market, fell to 51.9 in August from the 21-month high of 54.1 in July. Nevertheless, the reading was still above the 50-point threshold that separates expansion from contraction in the private sector.
The manufacturing PMI ticked down to 51.7 in August from 52.3 in July but remained in expansionary territory, where it has been for exactly one year. The outturn in August was due to softer increases in output and new orders. With business still busy in August, manufacturers raised both employment levels and purchasing activity. In terms of prices, input costs rose again in August, leading firms to increase output prices in order to protect their profit margins. Looking ahead, business sentiment in the manufacturing sector looking at the coming 12-month period decreased slightly in August.
The Nikkei services PMI fell to 51.5 in August from 54.2 in July but remained in expansionary territory for the third month in a row. Although new business inflows rose for the sixth consecutive month in August, the rate of increase slowed from July. As has been the case for the past 11 months, firms raised their headcounts in August, particularly in the information and communications sector. On the price front, input inflation continued to accelerate markedly, with reports of higher oil prices pushing up costs. Output inflation, however, remained low as businesses’ profit margins took a hit. Looking ahead, business sentiment in the services sector regarding the coming 12-month period improved in August to a three-month high.
Author: Edward Gardner, Economist