November PMI at 52.3; demonetisation weighs on manufacturing

Purchasing Managers Index (PMI), an indicator of economic health of manufacturing sector of a country has cooled down to expand at a slower pace of 52.3 in November as against a 22-month high of October which stood at 54.4.

A reading above 50 indicates economic expansion, while one below 50 points toward contraction. Indian PMI has shown a continued rising trend over the past months owing to higher manufacturing activities in the country.

PMIs are economic indicators derived from monthly surveys of private sector companies. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

Latest PMI data has factored in the negative effect the currency demonetisation has had on the manufacturing sector in the country. The withdrawal of high-value banknotes in India reportedly hampered manufacturing growth in November, with companies signalling softer increases in order books, buying levels and output.

Order books of major sectors rose at a moderate pace that was the slowest since the month of July. Consumer Goods producers recorded a sharp slowdown in growth. By sector, the weakest performer on this front was Consumer Goods,  as the industry suffers directly at the hands of any impact on the consumer spending behaviour.