Below is Perspective on October PMI Data by Ms. Madhavi Arora, Lead Economist, Emkay Global Financial Services
India Mfg PMI: Traction continues
# India’s mfg PMI continued its expansion, increasing further to 55.9 in Oct from 53.7 in Sept - the fourth straight month in expansionary state.
# The improvement in headline PMI was led by strong gains in new orders, driving higher stock purchases and production and indicating some silver lining for better production ahead.
# Employment is still sluggish while steep increase input costs (sharpest since early-2014) continues to pinch firms, squeezing their margins.
-- Anecdotal evidence highlighted higher chemical, fabric, metal, electronic component, oil, plastic and transportation costs.
# On net, Economic activity continues to recover even as the pace of improvement has somewhat moderated amid bottlenecks, with Services leading Goods sector in recovery.
We maintain our FY22 GDP estimate at 10.1% with services picking the slack ahead. The 2QFY22 is currently tracking around 9.8%.
# We note India was not an outlier in improving mfg PMI in Oct. The aggregate EM Asia PMI appears to have improved, with even China rising further 0.6-pt to 50.6-- registering the highest reading in four months.
# On DM front, the incoming dataflow has been encouraging with last week’s DM flash October PMIs, global mobility etc. moving up further.
- The move up in the DM services activity index vs Mfg index stood out in the October flash PMIs, which aligns with our view that the services sector should be the dominant force for the expected growth uplift this quarter globally and India as well.
By contrast, most DM’s flash mfg delivery times PMI and pricing PMIs ticked up yet again, suggesting supply constrains remain intense in the goods sector
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