Why India’s Services PMI Expanded in September

According to data provided by Markit Economics, the final Markit India Services PMI (Purchasing Managers’ Index) stood at 50.7 in September 2017 compared to 47.5 in August 2017. That beat the preliminary market estimate of 50.5.

It was the first expansion in services activity since June 2017. A level above 50 indicates an expansion, while a level below 50 indicates a contraction.

The services PMI for September included the following:

• Production output showed stronger improvement in September 2017 than in August 2017.
• New business orders and export orders improved at a faster rate in September 2017.
• Employment in the service sector improved in September 2017.

However, the business sentiment in the services sector was softer in September. The implementation of the Goods and Services Tax and rising uncertainty about this tax policy largely hampered growth for a variety of businesses. The rising cost of inventories pushed input cost inflation higher.

The Nifty 50 index fell 1.8% in September 2017. The iShares MSCI India (INDA), which tracks the performance of India, fell nearly 3.6% in September 2017, while the Vanguard FTSE Europe ETF (VGK), which tracks Europe’s (HEDJ) (EZU) (IEV) economic performance, rose 3.2% in September 2017. The weaker performance in major Indian markets indicates that some nervousness is still continuing in the economy.

In the next part of this series, we’ll analyze the performance of Brazil’s manufacturing PMI in September 2017.