• HDFC
• 24 Aug 2018
• Knowledge Centre

HDFC, Tester

The Nikkei India Composite PMI Output Index, that reflects both the manufacturing and services sectors, rose from 53.3 in June 2018 to 54.1 in July 2018. According to a report in a financial portal, this was largely owing to a rise in the pace of growth of new businesses, the fastest since June 2017.

 

“July 2018 data was encouraging, as the service sector observed the best performance since October 2016, underpinned by the strongest gain in new orders since June 2017,” said Aashna Dodhia, author of the report.

 

“Marked expansion in both the manufacturing and service sectors, with stronger growth in the latter, powered the fastest improvement in overall operating conditions in the economy since October 2016,” she added.

 

Some Negatives

 

However, she stated that the PMI price data reflected certain warning signs. Though overall input cost inflation lessened after touching a figure close to a four-year high in June 2018, services companies faced the fastest rise in input costs since March 2018, largely owing to high oil prices.

 

“An uncertain global climate, currency weakness, and strong inflation may continue to place pressure on the central bank to hike interest rates over the coming months,” she added.

 

Data from the Trading Economics website explains the concept of the Nikkei India Composite Output Index. It is described as a weighted average of the Manufacturing Output Index and the Services Business Activity Index, and tracks business trends across private sector activity, based on data collected from a representative panel of around 800 companies. The index tracks variables such as sales, new orders, employment, inventories, and prices. A reading above 50 indicates expansion in business activity, and below 50, a decline.

 

Accelerating Demand

 

Activity in India’s services sector witnessed growth at the fastest pace in nearly two years in July 2018, propelled by better demand and new business orders. The Nikkei India Services Business Activity Index rose to 54.2 from 52.6 in June 2018, according to a statement by research firm IHS Markit, which compiles the index. This sector contributes nearly 60% to the country’s GDP.

 

In addition to this, activity in the manufacturing sector also improved. This was reflected in the Nikkei India Purchasing Managers Index, which touched 52.3 in July 2018.

 

According to the PMI survey, despite a marked rise in the cost burden, service providers raised their output charges at the slowest pace since March 2017. The survey stated that “Underlying data highlighted that firms were unable to fully pass on greater cost burdens to price-sensitive clients.”