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Charts & Analysis

December Composite PMI Anaemic at 45, Slowdown Continues

The HSBC Markit Purchasing Managers’ Index (PMI) for December 2013 (Combined Services + Manufacturing) came in at 48, which indicates a continued contraction. (Anything less than 50 is contraction and more than 50 is expansion).


Earlier, the Manufacturing Index had come in at 50.7 which was marginally lower but still expanding.

Four of the six broad areas of the service economy registered lower output volumes, while new business contracted in five categories. As with the trend for
output, the sharpest decline in new orders was noted at Hotels & Restaurants. The Post & Telecommunication sub-sector remained resilient, with growth of both business activity and new orders recorded.

However they note that the rate of price inflation was low and business was generally upbeat about 2014.

These numbers don’t look great for the last quarter, but optimism means that people aren’t entirely disheartened. Still, a downturn isn’t complete until most, if not all, optimism dies – and we are likely to see more ups and then more deeper downs before things pick up.

  • kuriakose.bekxy says:

    Hi Deepak,
    RBI had released a study in August 2013 on relationship between WPI and PMI which was quite interesting. One of their findings was that “The break-even values of these price diffusion indices that signal neither expansion nor contraction are around 44, significantly less than commonly referred value of 50. This implies that when the PMI price indices exceed the value of 44, and not 50, WPI inflation (seasonally adjusted annualised month-on-month) would turn positive.”
    Link here:

    • Thanks Bekxy. I’m not sure that a PMI is more relevant to a WPI or to an IIP, because it is after all an index that indicates manufacturing activity. And WPI is a price indicator (not that of a manufacturing activity). So it could well be that coincidentally they have some layer of cointegration, but it’s quite likely to have a real cause and effect scenario. Not sure of the causation implication if that’s what the RBI is saying is…