India PMI July 2016


India: Economic conditions improve in July

August 3, 2016

Activity in India’s manufacturing sector picked up slightly in July, starting the second quarter of FY 2016 on firmer footing. The manufacturing Purchasing Managers’ Index (PMI), elaborated by Nikkei and IHS Markit, rose from June’s 51.7 to 51.8. The PMI has remained above the 50-threshold that separates expansion from contraction since January and July’s reading marked a four-month high.

July’s result reflected a robust increase in new business leading to strong output growth and a rise in buying levels. However, gains in employment were negligible in the same month. Meanwhile, price pressures remained broadly steady. IHS Markit analysts stated that, “India’s manufacturing economy is reviving at the beginning of the second half of 2016 after the slowdown seen in the April-June quarter, as growth of both production and new orders continues to strengthen in July. […] The ongoing muted trend for employment indicates that companies remain somewhat uncertain regarding the sustainability of the upturn.”

Meanwhile, the Nikkei services PMI rose from June’s 50.3 to 51.9 in July. The result marked a three-month high and was above the 50-threshold that indicates expansion in the sector. According to Nikkei, service providers benefited from a rise in new business which boosted activity. However, IHS Markit analysts commented that, “growth remains below-par compared with the long-run survey trend and, although expansion has been sustained for 13 consecutive months, the sector has so far failed to generate jobs.”

FocusEconomics Consensus Forecast panelists see fixed investment rising 5.9% in FY 2016, which is down 0.2 percentage points from last month’s estimate. For FY 2017, the panel expects fixed investment to increase 6.7%.

Author: Angela Bouzanis, Senior Economist

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India PMI Chart

India PMI July 2016 2

Note: Nikkei India Purchasing Managers’ Index (PMI). A reading above 50 indicates an expansion in business activity while a value below 50 points to a contraction.
Source: Nikkei and IHS Markit.

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