August PMI points to continued expansion in manufacturing & services activities

The Purchasing Managers’ Index (PMI) for both manufacturing and services activities came in stronger in August signalling that the economy continues to do well, and the prospects remain positive for the future.

For instance, the manufacturing sector PMI came in at 55.5 index points in August, reflecting continued expansion in activities, led mainly by the food and beverage sector which has seen an increase in new orders.

While the August index value is somewhat a softening from the 59.5 index points recorded in July, it isn’t necessarily a cause of concern as the index has continuously pointed to expansion.

In PMI, an activity is split between an expansion and a contraction at an index value of 50.0 while an activity is considered at a neutral level if the index value is 50.0.

Despite the persistent expansion in the manufacturing sector, the employment sub-index has fallen back to contraction in August, a development which is expected to be an aberration.

This is because the continuous expansion in manufacturing sector activities requires people to work in factories and plants. The textiles and garment sector too is seeing a recovery due to a strengthening order book and the upcoming year-end festive season.

The sector has begun re-hiring people as of late to meet the rising demand from the West, where they have their biggest markets.

Meanwhile, the services sector too followed with a stronger expansion in its activities as the sector PMI recorded an index value of 65.2, slightly easing from 71.1 in July.

The service sector expansion has also been broad based.

Business activities categorised under other personal services grew mainly due to the improvements in entertainment and recreational activities as people took trips and engaged in many outdoor activities, spending their sometimes extended holidays.

Further, the business activities in wholesale and retail trade, transportation services and financial services also indicated considerable growth due to the combined effects of rising consumer spend and easing interest rates.

However, business activities in the telecommunication, real estate and IT programming and consultancy related activities remained at the same level from July levels but all else recorded expansions.

Despite the expansion in services, the employment level continued to be in the contractionary territory.

Meanwhile, people in both manufacturing and services sectors expressed optimism both due to solid macro-economic conditions and upcoming festive demand, in spite of the election uncertainties.