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New orders and output levels in India’s manufacturing sector may have hit a 42-month high in March.
This leads in lifting overall private sector output to an eight-month peak despite a slight moderation in Services sector activity, as per the HSBC Flash PMI for this month.
The Manufacturing sector Flash PMI stood at 59.2 for March from a 56.9 PMI reading in February.
While the Services PMI eased from 60.6 last month to 60.3.
A reading of 50 on the PMI or Purchasing Managers’ Index indicates no change in activity levels.
Purchasing Manager’s Index(PMI)
The PMI is a forward-looking indicator of economic health, particularly in the manufacturing and service sectors.
It's a survey-based index derived from monthly surveys of purchasing managers in various industries.
What it measures:
The PMI doesn't directly measure economic output, but rather gauges business sentiment.
The survey asks purchasing managers about their expectations for factors like:
New orders
Production levels
Employment
Supplier deliveries
Inventories
How it's calculated:
Each question in the survey has three possible answers: 'higher,' 'no change,' or 'lower' compared to the previous month.
A diffusion index is then calculated, assigning a value to each response.
These values are summed up and weighted to create a final PMI score between 0 and 100.
What the score means:
A PMI score above 50 indicates expansion in the sector, suggesting economic growth.
A score below 50 indicates contraction, suggesting a decline in economic activity.
A score of exactly 50 suggests no change from the previous month.
Importance of PMI:
Provides valuable insights for businesses, investors, and policymakers.
Helps businesses with inventory management, production planning, and investment decisions.
Helps investors gauge economic trends and make informed investment choices.
Helps policymakers understand economic conditions and formulate policies accordingly.
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