India's manufacturing PMI hits 8-month high in July

Tags: Economy/Finance

India's manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, came at an eight-month high. 

Important facts

  • The S and P Global India Manufacturing Purchasing Managers' Index (PMI) rose to 56.4 in July, from 53.9 in June.

  • The survey said that this jump was driven by a significant increase in trade orders.

  • The PMI data for July points to an improvement in overall operating conditions for the 13th consecutive month.

  • The Indian manufacturing industry recorded a welcome combination of fast economic growth and soft inflation during July month.

  • Production increased at the fastest pace since last November, a trend that corresponds to a more forward-looking indicator of new orders.

  • The readings are based on a monthly survey of businesses that are primarily engaged in manufacturing activities.

  • Despite the solid performance of the manufacturing industry, overall job creation remained sluggish.

  • Most firms (98 per cent) opted to leave workforce numbers unchanged amid lack of pressure on operational efficiencies.

  • About 96 per cent of the manufacturers expect no change in production from current levels during the coming 12 months.

What is Purchasing Managers' Index (PMI)?

  • It is a measure of the prevailing direction of economic trends in manufacturing.

  • It is based on a monthly survey of supply chain managers across 19 industries, covering both upstream and downstream activities.

  • The price fluctuations of PMI and its components can provide useful insights to business decision makers, market analysts and investors.

  • PMI is used by the central bank to set interest rates.

Purpose of PMI

  • Providing information about current and future business conditions to the company's decision-makers, analysts and investors.

Calculation of PMI

  • It is represented by a number from 0 to 100.

  • A print above 50 indicates expansion while a score below 50 indicates contraction.

  • If the previous month's PMI is higher than the current month's PMI, it shows that the economy is contracting.

Five major Survey Areas of PMI

  1. Employment

  2. New orders

  3. Production

  4. Inventory levels

  5. Supplier deliveries

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