India: Private sector PMI improves to a five-month high
September 3, 2020
The composite Purchasing Managers’ Index (PMI) produced by IHS Markit rose to 46.0 in August from 37.2 in July. Nevertheless, the PMI remained below the 50-threshold indicating another decrease in business activity from the previous month.
The services PMI rose to 41.8 in August from 34.2 in July as new orders, output and employment levels all fell at a slower pace in August compared to July. The fall in new business and production remained steep in August due to the pandemic, but businesses continued to resume operations following lockdown restrictions imposed earlier in the year, in turn driving the improvement in the services sector PMI. On the price front, input costs rose marginally due to a rise in fuel costs, with producers passing increased cost burden on to consumers through output prices.
On the manufacturing side, the PMI climbed to 52.0 in August from 46.0 in July with output and new orders expanding at the fastest clip since February. That said, employment levels continued to decline albeit at a softer pace than in July and foreign demand remained depressed amid a fragile global economic panorama.
Commenting on the latest PMI data, Shreeya Patel, economist at IHS Markit, said:
"August highlights another month of challenging operating conditions in the Indian services sector. Sustained periods of closure and ongoing lockdown restrictions in both domestic and foreign markets have weighed heavily on the health of the industry […] That said, the survey showed signs of a potential recovery. Business sentiment was neutral after being negative in the previous three months and employment fell at the softest pace since March."
Author: Steven Burke, Economist