Nikkei/Markit Manufacturing Purchasing Managers’ Index

Indian manufacturing activity expanded for a second consecutive month in February as price cutting boosted both domestic and foreign demand, a business survey showed on Tuesday. The Nikkei/Markit Manufacturing Purchasing Managers' Index (PMI) held steady at January's 51.1 last month, its second month above the 50 mark that separates growth from contraction after it fell below that level in December for the first time in over two years, reports Reuters.

The PMI is a diffusion index incorporating survey results conducted on manufacturing firms throughout the country. Policymakers and traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, rather than waiting for the hard data to emerge. While manufacturing accounts for a far smaller percentage of economic output than services, it is far more cyclical and is therefore a useful indicator of where in the economic cycle the economy is currently situated.

A reading that is stronger than forecast is generally supportive (bullish) for the INR, while a weaker than forecast reading is generally negative (bearish) for the INR. The Markit PMI™ (Purchasing Managers’ Index™) series are among the most closely watched economic indicators in the world, tracking business conditions in over 30 countries. They provide advance insight into the private sector economy by tracking variables such as output, new orders, employment and prices across key sectors.

Central banks in many countries use the data to help make interest rate decisions, and analysts in the financial markets use PMI data to forecast official economic data. There are two parts to the monthly PMI releases: the headline PMI number, designed to provide a snapshot of the health of the economy, and the sub-indices, or component level data. The sub-indices provide insight into key economic drivers, such as inflation, exports, employment and inventories, according to www.markit.com.

Key features of PMI data: provide reliable fact-based indicators as opposed to opinion or confidence-based indicators; are produced rapidly, and far faster than comparable official data series; are released on a monthly basis; cover almost all private sector economic activity in many countries (including the all-important service sectors); are not revised after publication; are produced using the same methodology in all countries where we operate, enabling accurate international comparisons.