September PMI signals an easing in pace of manufacturing expansion
What is PMI?
- Purchasing Managers’ Index is an economic indicator which indicates the business activity & economic health of both the manufacturing and service sectors.
- PMI of India is published by Japanese firm Nikkei but compiled and constructed by IHS Markit, a London–based global information provider.
- PMI is an investor sentiment tracking index and is more dynamic in nature. They are derived from monthly surveys of about 400 private companies.
- Variables used for calculating the PMI are: Output, New Orders, Employment, Input Costs, Output Prices, Backlogs of Work, Export Orders, Quantity of Purchases, Suppliers’ Delivery Times, Stocks of Purchases and Stocks of Finished Goods.
- PMI, which is usually released at the start of the month, serves as a leading indicator of economic activity. It comes before the official data on industrial output, core sector manufacturing and GDP growth.
How to read PMI?
- While PMI >50 implies an expansion of business and economic activity, PMI <50 means contraction.
Why in News?
- India’s manufacturing sector experienced its slowest expansion in September since June, the Manufacturing Purchasing Managers’ Index indicated, with the index easing to 55.1 from August’s 56.2.
- A PMI reading above 50 indicates an increase in firms’ activity levels, and September marked the 15th straight month of growth in manufacturing activity.
View all comments