India Glooms While World Blooms

A slew of manufacturing data has been released in the last couple of days. It has been indicative of a worsening of problems in India but at the same time, considerable easing is being witnessed in most other parts of the world. The India Services and Manufacturing PMI released this week is indicative of contraction in both the sectors. Following an exactly opposite, and brighter trend was seen in China, were the PMI has touched multi-month highs.

The manufacturing PMI numbers announced on Monday this week indicated that the activity has touched its lowest point in the last 4.5 years to 48.5.

The HSBC Services PMI for India for August 2013 came in at 47.6 against 47.9 which signals a contraction in the services sector and confirms that the India’s private sector output has fallen sharply in August on account of the slump in new orders. The fastest contraction was reported in the ‘Transport & Storage’ sector. The Indian services sector continued to create jobs albeit at a slower pace.

Input price inflation for the services sector has accelerated to the sharpest level in six months and is visible from the prices paid by these firms. Despite the cost inflation, private sector companies have only marginally raised their selling prices in August due to increased competitive pressures. Also responsible for the increased input inflation is the rupee depreciation.

HSBC’s Composite PMI for India for the month of August 2013 stood at 47.6 against 48.4 in July 2013, marking continued contraction in business activity in the country.

In China however, the Composite PMI numbers for August were at 51.8 against 49.5 in July, showing significant improvement. The numbers have improved on the back of improved business activity in both, services and manufacturing sectors.

The Services PMI for August rose to a five-month high to 52.8. This has been in line with the trend seen in the manufacturing PMI numbers. Employment levels fell at service providers for the first time in last four months but service providers are anticipating an increase in business activity over the next year. It is noteworthy that the sentiment has skewed towards the positive with an improvement in the services sector of China for the second month in succession.

As per the data released by HSBC on Monday, China’s manufacturing PMI numbers for August rose to a three-month high of 50.1.

Earlier this week, European manufacturing data charmed investors as the indicator for August showed a reading of 51.4 against 50.3 in July. This shows that the economy is well on the course of recovery. UK’s PMI numbers have also signaled a robust recovery in the manufacturing sector due to rising manufacturing output and higher growth in the new orders.

Post all of these releases, global markets were keenly watching developments in the US. Announced yesterday, the HSBC Manufacturing PMI came in at 53.1 in August against 53.7 in July signaling slower but moderate, improvement in overall manufacturing business conditions.

At the same time, the JPMorgan Global Manufacturing PMI for August 2013 came in at 51.8 in August against 50.8 in July. The report shows that the global manufacturing sector has continued to edge higher at a moderate pace. Manufacturing production has rose for the tenth successive month but the drag came from weakness in emerging markets such as India, Taiwan, South Korea, Indonesia, Vietnam and Brazil which reported lower output volumes.

Overall the data indicates that India’s problems are more of domestic nature as most parts of the rest of the world are showing good recovery from the lows of the global meltdown and Eurozone sovereign debt crisis.