Purchasing Managers' Index (PMI) Interpretation

India’s services PMI surged to 62.9 in August - the highest since 2010. PMI stands for Purchasing Managers’ Index. It’s a survey-based indicator where company managers are asked about new orders, hiring, exports, costs, etc. A score above 50 means expansion, below 50 means contraction. Think of it as a quick health check of the economy, based on what managers at the ground level are actually seeing. Why this matters: -Services account for ~55% of India’s GDP - IT, banking, hospitality, logistics, transport, consulting. -PMI above 60 is not routine. It means growth is broad-based and very strong. -Export demand for Indian services hit a one-year high, despite global slowdowns. -Services generate more jobs per rupee invested than manufacturing. So this is directly linked to employment momentum. But the timing is what makes this important. 👉While other data (credit growth, vehicle sales, rural demand) points to slowing consumption, services are quietly carrying the economy. 👉Historically, India’s services cushion has been our safety net - during 2008, and again during Covid. Today, once more, it is the silent growth engine. Implications: -For policymakers, this challenges the idea that India’s $5 trillion journey must be factory-led. The offices may get us there first. -For investors, it signals resilience in IT, fintech, logistics, and even hospitality stocks. -For workers, the jobs of the next 5 years may not come from assembly lines but from service roles. 📌 The question is this: Can India replicate China’s dominance in manufacturing with its own dominance in services exports? Or does overdependence on services make us vulnerable to the next global downturn?

Manufacturing edging toward expansion [with corrected figure] The Institute for Supply Management's® Manufacturing Purchasing Managers Index (PMI®) for September is out. The index shows continuing contraction in manufacturing, but at only a marginal rate. 💡 The Manufacturing PMI® came in at 49, compared with 47.6 In August. This number is a diffusion index, which measures the difference between positive and negative responses. Because the September number is below 50, it indicates that slightly more purchasing managers are reporting contracting activity than those reporting expanding activity. The number tells us how widespread contraction is among responding firms, but not how severe the decline in activity is. ⬇ The manufacturing PMI® has been contracting now for eleven consecutive months, as the manufacturing part of the economy has fallen into recession. Manufacturing industrial production, reported by the Federal Reserve, has been lower than the previous year for the past six months. ⬆ The September figure of 49 continues an improving trend that began in July. According to ISM®, "A Manufacturing PMI® above 48.7 percent, over a period of time, generally indicates an expansion of the overall economy." In any case, the less widespread contraction give some hope that manufacturing weakness may soon ease. ⬆ The PMI® data also include more detailed sub-indexes. In September, the production index broke into positive territory after being flat in August. Slightly more respondents reported employment expansion than contraction. A larger proportion of respondents reported an increase in new orders, but order backlogs are shrinking. Prices paid for materials decreased more broadly in September, although the recent energy price could change that in coming months. The ISM® also reports an index for the the services sector. That one has been running in slight positive territory, consistent with other indicators that the service side of the economy has held up better than manufacturing. The September services PMI® comes out Wednesday. You can read more about the ISM® Report on Business® at their web site, https://lnkd.in/gD4hy76r. #ism #PMI #manufacturing #production  

India’s services sector has left behind the US, China, and the UK! Here is how– You see, India’s services PMI for January came in at 61.8. While the US, China, and UK’s services PMI stood at 52.5, 52.7, and  54.3 respectively. This means the services sector is performing far better in India than in these countries. But wait, what is PMI? It stands for the Purchasing Managers Index. It is an economic indicator that helps us understand the ongoing trends of a country's private sector. Alright, but how is the data collected to understand these trends? You see, every month S&P Global’s subsidiary IHS Markit rolls out a survey to managers in the services and manufacturing sectors. This survey is filled with questions about how the business landscape has changed from the previous month. Based on their responses, IHS compiles an index which could range between 0-100. Now, if this number is below 50, it means the economy is on a contraction spree. On the flip side, if the PMI crosses the 50-mark — it signals economic expansion. And, a higher rating on the index means stronger growth in the sector as compared to others. That is why we said India’s services sector is growing better than the US, China, and the UK. But it does not end just there! India's services PMI has been cruising above the 50-mark for 30 months straight. The service sector contributes over 50% to India's GDP, making it a true powerhouse in the economic landscape. As a founder of a startup that contributes to the service sector of India, this development makes me feel extremely proud!   Do you think we will see similar growth in the coming months too? Let us know in the comments and follow Finshots for more!