PMI manufacturing further climbs to 57.6 in Nov; strongest growth in 10 months

The manufacturing sector continued to improve as the Purchasing Managers’ Index (PMI) moved up to 57.6 in November as against 55.9 in October. The good thing is that new job opportunities have been created.

At 58.4, services PMI rises at fastest pace in over a decade

“It signalled the strongest improvement in the health of the sector for ten months. Moreover, the headline figure was well above its long-run average of 53.6,” IHS Markit said in its report on PMI. Manufacturing has a share of over 14 per cent in Gross Value Added (GVA) and is considered as a source of job multiplier. PMI is one of the high-frequency indicators showing how the economy is performing.

Favourable aspects

Commenting on the latest survey results, Pollyanna De Lima, Economics Associate Director at IHS Markit, said the Indian manufacturing industry continued to expand in November, with growth gathering pace and forward-looking indices generally pointing to further improvements in the months to come.

The fact that firms purchased additional inputs at a stronger rate amid efforts to restock, combined with recurring declines in inventories of finished goods and tentative signs of a pick-up in hiring activity, indicates that the production volumes will likely expand further in the near term.

PMI Manufacturing rose further to 55.9 in October

“The key threat to the outlook, in addition to potential new waves of Covid-19, is inflationary pressures. For now, companies are absorbing most of the additional cost burdens and lifting output charges only moderately. Should raw material scarcity and shipping issues continue to feed through to the purchasing prices, substantial increases in output charges could be seen and demand resilience would be tested,” she said.

Further, she added, businesses were indeed worried that inflationary pressures could hamper demand and production in the year ahead, as signalled by confidence weakening to the lowest in almost a year-and-a-half.

Hiring, as against job shedding earlier

PMI is based on responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. A diffusion index is calculated for each survey variable. The index is the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses. The headline PMI is a weighted average of the following five indices: new orders (30 per cent), output (25 per cent), employment (20 per cent), suppliers’ delivery times (15 per cent) and stocks of purchases (10 per cent).

The report accompanying PMI said that the Indian manufacturing sector continued to expand strongly in November, as an accelerated rise in sales supported the fastest upturn in production for nine months.

Companies scaled up input buying which, in turn, led to the second-quickest accumulation in stocks of purchases since data collection started nearly 17 years ago. Also, “there were tentative signs of an improvement in hiring activity, following three successive months of job shedding,” the report said.

On the price front, the latest results showed that cost inflationary pressures remained intense amid transportation issues and difficulties among suppliers to source raw materials. Input prices increased at a rate that was broadly similar to October’s 92-month high.

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