Published: 10th Nov, 2023
Context:
As per the S&P Global India, the Services PMI (Purchasing Managers’ Index) has dropped from 61 in September to 58.4, signalling its slowest uptick since March.
What is Services PMI?
- In order to get an economic insight into a sector, the purchasing managers' index (PMI) provides an indicator based on surveys of businesses. The most common PMI surveys are the Manufacturing PMI and the Services PMI.
How is it compiled?
- The IHS Markit India Services PMI is based on data compiled from questionnaires sent to purchasing executives in around 350 private service sector
- The index tracks variables such as sales, employment, inventories, and prices.
- The PMI is based on a monthly survey of supply chain managers across 19 industries, covering both upstream and downstream activity
What are the benefits from PMI?
- It consists of a diffusion index that summarizes whether market conditions are expanding, staying the same, or contracting as viewed by purchasing managers.
- The purpose of the PMI is to provide information about current and future business conditions to company decision-makers, analysts, and investors.
- The Services PMIprovides advanced insight into the services sector, giving investors a better understanding of business conditions and valuable information about the economic backdrop of various markets.
- Services PMI also provides the stock market an indicator of whether the current economy is healthy or not, which generally translates to higher corporate profits.
- In the bond market, they do not prefer rapid growth and are extremely sensitive if the economy is causing potential inflationary pressures. The PMI data are also used by the Reserve Bank of India to help make interest rate decisions.
- In December 2020, India's services sector activity gained momentum and touched a five-month high, supported by an uptick in new business orders that boosted output as well as employment.
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