PMI Manufacturing rose further to 55.9 in October

Manufacturing sector gained in October as Purchasing Managers’ Index (PMI) moved up to 55.9 as against 53.7 in September. However, the job situation is yet to improve.

Manufacturing has a share of over 14 per cent in Gross Value Added (GVA) and considered as a source of job multiplier. PMI is one of high frequency indicators showing how economy is performing.

Economic research firm IHS Markit prepares this survey-based index and releases with a detailed report every month in advance of comparable official economic data.

Expansion in production

Commenting on the latest survey results, Pollyanna De Lima, Economics Associate Director at IHS Markit, said that October data showing notably quicker expansions in new orders, production and input purchasing. “With companies gearing up for further improvements in demand by building up their stocks, it looks like manufacturing activity will continue to expand throughout the third quarter of fiscal year 2021/22 should the pandemic remain under control. Upbeat business confidence and projects in the pipeline should also support production in the coming months,” she said.

Manufacturing has a share of over 14 per cent in Gross Value Added (GVA). Its 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).

Also read: Unlike manufacturing, services PMI drops to 55.2 in September

IHS Markit noted that despite the notable upturn in new orders, Indian manufacturers were able to keep on top of their workloads, as signalled by another reduction in backlogs. The pace of depletion was only fractional, however. ‘This lack of pressure on capacity, besides government guidelines surrounding shift work, meant that employment continued to decline. That said, the rate of job shedding was marginal,” it said.

Adding to that De Lima noted that even there is overall improvement in operating conditions, jobs failed to increase. “This was often linked to sufficient capacity to deal with current workloads and government norms surrounding shift work,” she said.

Talking about future, the agency expects business conditions will improve further as the easing of the pandemic boosted confidence. “Firms also intend to develop new products, invest in marketing and focus on customer relations to support growth in the year ahead. The overall degree of optimism strengthened to a six-month high,” it said.