Why India’s Services PMI Contracted
India’s Services PMI in August
According to data provided by Markit Economics, India’s services PMI (purchasing managers’ index) stood at 47.5 in August 2017 as compared to 45.9 in July 2017. Although it was better than it was in July, it was still in the contraction zone. A level above 50 indicates expansion in economic activity, while anything below 50 indicates contraction.
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Factors that affected India’s services PMI in August included the following:
- Production volume and output slowed in August 2017.
- August’s new business orders and export orders were also hugely affected by the implementation of GST (goods and services tax) in July 2017. Both orders fell in August.
- Employment in the manufacturing sector also slowed in August 2017.
Performance of various ETFs in August
The iShares MSCI India ETF (INDA), which tracks the performance of India, fell nearly 0.7% in August 2017, while the SPDR S&P 500 ETF (SPY), which tracks the performance of the S&P 500 Index (IWM) (QQQ), rose nearly 0.3% in August 2017.
The implementation of the GST hampered India’s services activity. Confusion about the GST and uncertainty about this one-tax policy affected business sentiment in the last two months. Slower manufacturing and services activity could hamper economic growth for the quarter ending on September 30, 2017.
In the next part of this series, we’ll analyze China’s manufacturing PMI in August 2017.