Manufacturing Purchasing Managers’ Index (PMI)

Why in News?

According to the Manufacturing PMI, India's manufacturing sector activity falls to a 9-month low in November on a softer rise in sales, production.

• PMI – It is an economic indicator derived from monthly surveys of companies.
• It reflects business activity trends in the manufacturing & services sectors.
• 2 types – Manufacturing PMI and Services PMI, also a combined PMI is also available.
• Compiled by – S&P Global, a global major in financial information and analytics.

Manufacturing PMI

• Focus – Captures activity in the manufacturing sector.
• Survey Basis – It is derived by sending a fact-based questionnaire to manufacturing firms.
• 5 key variables & Weights -
  • New orders – 30%
  • Output – 25%
  • Employment – 20%
  • Suppliers’ delivery times – 15%
  • Stock of items purchased – 10%
• Interpretation – Indicates whether conditions are expanding (Above 50), contracting (Below 50), or stable (Exactly 50).
  • Rate of expansion/contraction judged by deviation from 50 and comparison with previous month.
• Significance – It is released before GDP and industrial output data; helps to predict the direction of the economy; manufacturers adjust production based on new orders; Economists track PMI for forecasting growth trends.

Key findings (November Manufacturing PMI)

• Decline in PMI – Manufacturing PMI fell from 59.2 in October to 56.6 in November, highlighting the slowest improvement in operating conditions since February.
• Key reasons for decline –
  • Tariff Impact – U.S. tariffs on Indian exports slowed manufacturing expansion; new export orders PMI fell to a 13-month low.
  • Domestic Factors – Includes fading of the boost from GST cuts and challenging market conditions reported by firms.
  • International sales trend – Remained still favourable in Africa, Asia, Europe, and Middle East, but overall growth momentum weakened.
  • On average, new export orders rose at the weakest pace in over a year.
• Prices & Inflation – With input costs and selling charges rising at the slowest rates in 9 and 8 months respectively, inflationary pressures eased, offering some relief to producers.
• Purchasing Activity – Manufacturers in India adjusted their hiring efforts and purchasing activity in line with a slowdown in new order growth.
• Employment – Employment expanded at the softest pace in 21 months of uninterrupted growth.

References

1. The Hindu | Manufacturing sector activity falls to 9-month low
2. Business Standard | Manufacturing PMI