India: Economic activity rallies in February
March 3, 2017
Activity in India’s manufacturing sector continued to rally in February, as the economy recovered from cash shortages resulting from demonetization. The manufacturing Purchasing Managers’ Index (PMI), elaborated by Nikkei and IHS Markit, inched up from January’s 50.4 to 50.7. As a result, the manufacturing PMI remains above the 50-threshold that separates expansion from contraction.
Output and new orders rose at a faster pace in February, fueling the overall improvement of the index. Evidence pointed to a return to normal business conditions in India, after last year’s cash crunch led to a downturn in December. Despite the better business environment, conditions in the labor market once again failed to improve.
Meanwhile, the Nikkei services PMI also improved in February, rising from January’s 48.7 to 50.3. After slumping to a demonetization-related near three-year low in November, the index returned to expansionary territory in February. According to Nikkei, a pickup in demand helped the sector. Inflationary pressures, however, sent input prices climbing and firms were forced to raise their prices.
Author: Christopher Thomas, Economist