Manufacturing PMI revives, but so do prices

As the manufacturing sector revives, the upside risk to inflation too will rise


Higher manufacturing growth, however, has also led to increased input prices. Photo: Bloomberg
Higher manufacturing growth, however, has also led to increased input prices. Photo: Bloomberg

The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) rose to 54.4 for October, the highest level in 22 months.

A reading above 50 denotes expansion from the previous month, while one below 50 indicates contraction.

Since the index is seasonally adjusted, the improvement is not merely on account of the festive season and it suggests that we’re finally seeing the long-awaited turnaround in manufacturing growth.

Both output and new orders showed good growth.

Higher manufacturing growth, however, has also led to increased input prices and the chart shows that the input price sub-index of PMI is the highest in over two years.

Part of the rise in input prices has been passed on to consumers and although the increase in the output price index is modest, it is at a six-month high.

In short, as the manufacturing sector revives, the upside risk to inflation too will rise.

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