Manufacturing output hits 20-month high

CHENNAI: India’s manufacturing purchasing managers’ index (PMI), a key measure which indicates the mood in manufacturing, rose to a 20-month high of 58.5 in February — its strongest reading since June 2008 — up from 57.7 in January 2010.

PMI is an indicator of the economic health of the manufacturing sector. The index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment . A PMI of more than 50 represents expansion of manufacturing sector, compared with the previous month. A reading under 50 represents a contraction, while a reading at 50 indicates no change.

“At 58.5, the headline index is consistent with the ongoing doubledigit gains in industrial production which in turn is likely to mean that spare capacity is being eaten into rapidly,” said Robert Prior-Wandesforde , senior Asian economist at HSBC. The HSBC Markit purchasing managers’ index (PMI) is based on a survey of 500 companies.

“Although the output prices balance surprisingly dropped back in February, while remaining consistent with price gains, there is more and more evidence of emerging supply-side constraints in labour and product markets.”

The new orders index rose to 64.0 from January’s 62.9, an HSBC statement said.

“While new export orders grew less strongly in February than January , this didn’t prevent the overall new orders series from hitting a high in the current upturn,” said Prior-Wandesforde . “The same was also true of output growth, which has rarely shown such strength since the series began in April 2005.”