What do we interpret from the sharp bounce in the Manufacturing PMI for the month of October 2020?

The PMI data was expected to be good and that is how it turned out. The Manufacturing PMI Index, rose for the third month in a row touching a new high level of 58.9. This growth in PMI is the sharpest since 2007 and that is a long time.

Normally, PMI of above 50 is considered expansionary and less than 50 is considered contractionary. In April 2020, PMI slipped had slipped into negative territory after remaining in growth territory for almost 32 months in succession.

Within the PMI basket, there was a sharp recovery in the levels of new orders as well as in output levels as there is an urgent attempt to bring production back to pre-COVID levels. The surge in purchase of inputs and restocking also indicates that growth will continue.

As a result, the PMI Manufacturing is expected to remain buoyant in the coming months too. The only factor that was disappointing was the reduction in payrolls in October. That shows that even as production is picking up, jobs are not being created.