India: Composite PMI retreats further in September
October 4, 2018
The composite Purchasing Manager’s Index (PMI), produced by Nikkei and IHS Market, fell to 51.6 in September from 51.9 in August, but remained above the 50-point threshold that separates expansion from contraction in the private sector. This outturn was due to a weaker expansion in the services sector in September than in August, although the manufacturing sector recorded stronger growth.
The services PMI fell to 50.9 in September from 51.5 in August, reaching a four-month low. This was largely due to stagnant new business inflows, with companies reporting that market conditions were disappointing amid lower demand and higher prices. Input prices increased strongly in September due to higher fuel costs. Moreover, a weaker rupee was translating into more expensive imports. On the back of this, companies raised output prices in September at the fastest pace since April. Looking ahead, business sentiment in the services sector regarding the coming 12-month period remained in positive territory.
The manufacturing PMI increased from 51.7 in August to 52.2 in September. New orders increased strongly, benefitting from robust domestic and foreign demand. Furthermore, output increased for the 14th consecutive month. This all encouraged higher purchasing activity, which in turn led to higher inventory levels. Growth in inventories hit the fastest rate since May 2017. Backlogs of work ticked down slightly in September, partly due to higher staffing levels, which increased at the fastest pace since June. In terms of prices, input costs increased notably, partly due to currency pressures and supply shortages. Manufacturers passed these higher prices on to customers, leading to higher output price inflation than in August. Looking ahead, business sentiment in the manufacturing sector looking at the coming 12-month period decreased slightly in September, hitting a three-month low.
India Fixed Investment Forecast
FocusEconomics Consensus Forecast panelists see fixed investment rising 8.0% in FY 2018, which is unchanged from last month’s forecast. For FY 2019, the panel expects fixed investment to increase 7.8%.
Author: Edward Gardner, Economist