India PMI


India: Manufacturing and Services PMIs improve in July

August 5, 2015

The Nikkei manufacturing Purchasing Managers’ Index (PMI) rose from 51.3 in June to 52.7 in July, which marked a six-month high. As a result, the PMI remains above the 50-threshold that separates expansion from contraction in business activity in the manufacturing sector.

According to Nikkei, July’s increase was driven by stronger growth in output and new orders, compared to June. The robust expansion in production was driven largely by a rise in new business inflows suggesting increased demand. New export business picked up steam in July and recorded the largest expansion in five months. However, despite the positive result of the survey, manufacturers shed jobs, albeit marginally. Input price inflation rose slightly in July, although it still remains weaker than the series average. Nikkei pointed out that, “growth in India’s manufacturing economy rebounded in July, with the PMI rising since the prior month. […] Although the latest data suggest that the manufacturing upturn gained traction, worries regarding the labour market persist. Continued job shedding highlights the concern felt by businesses towards the outlook, with firms failing to increase workforce numbers to any great extent since early 2014.”

Meanwhile, the services PMI rebounded in July, rising from 47.7 in June to 50.8. As a result, the PMI returned to expansionary territory after two months, indicating that business activity in services was contracting. According to Nikkei, the result came on the back of a renewed rise in new work and largest rate of job creation in two years. However, Nikkei points out that, “while it was welcome news to see a return to growth of activity in the Indian service sector during July, we are still looking at a modest improvement at best. The same could also be said for employment, which increased at the fastest pace for two years, but only slightly. Moreover, uncertainty around the future path of the economy has led confidence to slip to a record low.”

FocusEconomics Consensus Forecast panelists see fixed investment rising 6.5% in FY 2015/2016, which is up 0.2 percentage points from last month’s estimate. For FY 2016/2017, the panel expects fixed investment to increase 8.2%.

Author: Angela Bouzanis, Senior Economist

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India PMI Chart

India PMI July 2015

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 Markit.

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