India’s manufacturing sector activity improved for the third straight month in October 2020 with companies raising output to the greatest extent in 13 years amid robust sales growth.
The headline seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) rose from 56.8 in September 2020 to 58.9 in October 2020, and pointed to the strongest improvement in the health of the sector in more than a decade.
What is a Purchasing Managers’ Index (PMI)?
- Started in 1948 by the US-based Institute of Supply Management, a Purchasing Managers’ Index (PMI) is an indicator of business activity — both in the manufacturing and services sectors.
- PMI is a survey-based measures that asks the respondents about changes in their perception of some key business variables from the month before.
- It is calculated separately for the manufacturing and services sectors and then a composite index is constructed.
- A figure above 50 denotes expansion in business activity. Anything below 50 denotes contraction.
- The PMI is usually released at the start of the month, much before most of the official data on industrial output, manufacturing and GDP growth becomes available.
- It also gives an indication of corporate earnings and is closely watched by investors as well as the bond markets.
(Source: The Hindu and ET)
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