The Purchasing Managers’ Index (PMI) has hit a 31-month high

PMI rises to a 31-month high: In May, the S&P Global India Manufacturing PMI rose to 58.7, the highest level in 31 months.

PMI (Purchasing Managers’ Index)

  • The PMI is a measure of business activity in both the manufacturing and service 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 trend key insights

  • Quickest growth in factory orders: Factory orders increased at the quickest rate since January 2021.
  • Input accumulation at an unprecedented rate: Due to decreasing costs, producers accumulated inputs at an unprecedented rate.
  • Improvement in operating conditions: The indicator demonstrates a significant improvement in operating conditions, up from 57.2 in April.
  • Strong growth in order books and exports: Order books increased for the 23rd month in a row, aided by an increase in export deals.
  • Highest output levels in 28 months: Output levels reached the highest point in 28 months.
  • Increased hiring: Pressure on capacities led firms to increase hiring, reaching a six-month high.

Reasons for this increase

  • Price increases: Producers raised selling prices at a solid and faster rate in May, the fastest in a year.
  • Low input costs, but higher charges: Input costs were historically low, but producers raised their prices in response to ongoing cost rises and a favourable demand environment.
  • Enhanced business confidence: Business optimism in growth increased to a five-month high.
  • Public trust in the economy: Publicity and demand resilience also contributed to the upbeat forecast.
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