PMI Services at 13-Year High

  • The S&P Global India Services Purchasing Managers’ Index (PMI) reached a 13-year high of 62.3 in July, indicating considerable development in India’s services industry.
  • Increased demand, new business prospects, and healthy export orders are driving the rebound.
  • However, problems such as growing input costs and conservative output pricing point to a more complex picture.

Purchasing Managers’ Index (PMI)

  • PMI is an indicator of business activity — both in the manufacturing and services sectors.
  • S&P Global compiles the S&P Global India Services PMI from questionnaire responses from a panel of around 400 service sector companies.
  • It is a survey-based metric that asks respondents about changes in their assessment of some key business factors from the previous month.
  • It is calculated individually for the manufacturing and services sectors before being combined to create a composite index.

How is the PMI calculated?

  • The PMI is calculated using a series of qualitative questions.
  • Executives from a large sample of hundreds of enterprises are asked to judge whether key indicators such as output, new orders, business forecasts, and employment were greater than the previous month.

How should the PMI be read?

  • A value greater than 50 indicates increased business activity. Anything less than 50 indicates contraction.
  • The larger the deviation from this midpoint, the greater the expansion or contraction. The rate of expansion can also be determined by comparing the PMI to the previous month’s data.
  • If the statistic is higher than the previous month’s, the economy is growing quicker. It is expanding at a slower rate if it is lower than the prior month.

Recent Feat Achieved

  • Output Levels: According to the survey-based index, output levels have grown at the quickest rate since June 2010, supported by robust demand and increased new business gains.
  • Despite the increase in workload, job creation has remained modest, with a “slight” pace of employment. Part-time, full-time, permanent, and temporary employees were employed by firms.
  • Rising Input Costs: Input costs increased at the quickest rate in 13 months, owing mostly to higher food, labour, and transportation prices.
  • Firms, on the other hand, were cautious in their output pricing strategy, with output prices increasing at the slowest rate in three months. This strategy could be explained by a desire to acquire fresh contracts.
  • Export orders increased significantly, with firms reporting the second-fastest increase in export orders since the index’s debut in September 2014.
  • Countries such as Bangladesh, Nepal, Sri Lanka, and the UAE emerged as important drivers of development in export orders.
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