October PMIs raise the odds of a Fed rate hike

Markit PMI for services rose to 54.8 in October from 52.3 in September, indicating that services growth momentum has increased


Markit PMI for manufacturing showed a strong upturn, rebounding to 53.2 in October from the three-month low of 51.5 in September. Photo: Bloomberg
Markit PMI for manufacturing showed a strong upturn, rebounding to 53.2 in October from the three-month low of 51.5 in September. Photo: Bloomberg

The US Federal Reserve is widely expected to hike policy rates in December and the latest purchasing managers’ indices (PMIs) for both manufacturing and services just raised the odds for the event.

The Markit PMI for services rose to 54.8 in October from 52.3 in September, indicating that services growth momentum has increased.

The reading is the highest since November 2015.

Even the Markit PMI for manufacturing showed a strong upturn, rebounding to 53.2 in October from the three-month low of 51.5 in September.

New orders in both manufacturing and services rose.

Govt duties deter steel imports

Government curbs have sharply brought down steel imports so far this fiscal year. Hot rolled coil steel imports plunged 50% in April-September.

According to S&P Global Platts, the diminished competition from imports helped strengthen domestic steel prices.

But that can provide limited relief for local steel makers as demand remains subdued, it said. Further many are expanding capacities, keeping afloat concerns about oversupplies.

“Unluckily for Indian steelmakers, many are in the process of either commissioning newly installed facilities or ramping them up. These had been under construction for years and delaying start-up until demand improves is apparently not an option,” S&P Global Platts said in a post.

Regional troubles surface in microfinance

The surge in microfinance business has been stirring up enough worries of late. Religare Capital Markets Ltd highlighted fresh troubles for the industry from the Wardha district in Maharashtra, citing a local newspaper report.

In a recent note, the brokerage firm states that microfinance loans are diverted by borrowers towards personal rather than business purposes.

Most of the microfinance lending is to the joint lending group model wherein credit is given to a group of five women.

“As NPAs pile up, we believe the microfinance sector is due for a sharp correction, though the timing is uncertain,” said the note. Valuations of microfinance lenders are at their peak, states Religare.

READ MORE