India: Private sector PMI continues to rise in October
November 2, 2020
The composite Purchasing Managers’ Index (PMI) produced by IHS Markit rose to 58.0 in October from 54.6 in September, marking the strongest increase in roughly nine years as Covid-19 containment measures were loosened. Consequently, the PMI moved further above the 50-threshold indicating an increase in business activity from the previous month.
The services PMI rose to 54.1 in October—the first expansion since March—from 49.8 in September. The relaxation of lockdown restrictions supported domestic demand and drove new orders and output higher in October. Moreover, business sentiment turned optimistic in October as a majority of respondents expected stronger output a year ahead. Nevertheless, the labor market continued to deteriorate, but mainly the result of labor shortages as many workers were yet to return from being laid off due to the pandemic.
On the manufacturing side, the PMI climbed to 58.9 in October from 56.8 in September as output expanded at the strongest pace in roughly 13 years. The relaxation of containment measures stoked demand driving new orders domestically, while exports also increased robustly in October. That being said, government regulations on the sector to control the spread of the virus led to some job shedding in the month, which coupled with the rise in new orders led to a strong uptick in outstanding work.
Commenting on the latest PMI data, Pollyanna De Lima, economics associate director at IHS Markit, said:
"While a revival of the manufacturing industry began in August, only now the service sector started to heal. Service providers signaled solid expansions in new work and business activity during October. They were also more upbeat about the outlook, though hopes of output growth in the year ahead were pinned on a COVID-19 vaccine. Service providers noted another decline in employment, but anecdotal evidence suggested that efforts to hire had been hampered by labor shortages. Survey participants indicated that workers on leave had not returned and that a widespread fear of COVID-19 contamination continued to restrict staff supply”
Author: Steven Burke, Economist