InvestorQ : How does the latest PMI Manufacturing data for India look like for Sep-20?
Anjana Aiyar made post

How does the latest PMI Manufacturing data for India look like for Sep-20?

Khushi Patel answered.
3 years ago

There has been some positive news from the Purchase manager’s index or PMI for manufacturing in Sep-20. The highlights are captured here.

· The economy showed distinct signs of recovery in Sep-20 as pent-up demand played its part and the economy gradually reopened in June after a strict lockdown tailed off. That positive downstream effect is gradually beginning to show now.

· In fact, manufacturing expanded to the highest level in more than 8 years during the month of Sep-20. There were a slew of fresh export orders as well as a spike in domestic sales as the unlocking progressed during the month.

· To give a picture, the PMI Manufacturing for Sep-20 came in at 56.8 compared to 52 in Aug-20. This is the highest mark since Jan-2012. This indicates an expansion in manufacturing as well as positive momentum; based on the Markit definition.

· Most manufacturing units were back in action and exports bounced back following almost six successive months of contraction. The sharp spike in input purchases during the month of Sep-20 also hinted at heightened business confidence.

· The surge in factory activity is largely on the back of businesses ramping up their production to meet festive demand ahead of Navratri and Diwali. Hence real optimism may have to wait for some more time before jumping to conclusions.

· However, critics have argued that PMI being MOM is more sensitive to shifts whereas IIP being YOY is more reliable as a long term indicator. The IIP even for the month of August is likely to remain negative.

· One area of concern could be that jobs are really not picking up at the same pace. Most companies have reported challenges in hiring workers while others are keeping staff at bare minimum due to social distancing requirements.

To a large extent, low costs are leading to an upturn in demand from the exports segment and that is keeping the PMI robust.