Economic activity in the manufacturing sector expanded in November 2014 at a faster pace than in September 2014, said MCB Purchasing Managers Index (PMI). According to MCP PMI report issued by MCB Bank Limited Tuesday, manufacturing expanded in November as the MCB PMI registered a reading of 65.65.
November 2014 reflects the 6th consecutive reading of growth in the manufacturing sector but at a faster pace than the previous reading of September 2014. A good reading enhances the attractiveness of an economy. The MCB PMI reading was registered at 65.65 for November 2014. A reading above 50 shows expansion in the manufacturing sector and economy. New Orders and Production Indices reported a value of 76.6 and 67.2, respectively. The Employment Index registered a reading of 56.5 while the Prices Paid and Prices Received Indices showed the readings of 64.0 and 64.8, respectively.
The magic number for the PMI is 50. A reading of 50 or higher generally indicates that the manufacturing is expanding. If manufacturing is expanding, the general economy should be doing likewise. As such, it is considered a good indicator of future GDP levels. Another useful figure to remember is 42. If the number falls below 42, over a period of time, it generally indicates contraction in the overall economy and recession could be just around the corner. The index value between 42 and 50 indicates that economic growth is anaemic and flat.
Therefore, the November 2014 PMI indicates growth for the 6th month in the overall economy and expansion in Pakistan's manufacturing sector but at a faster pace. November 2014 MCB PMI indicates that the pace of growth in the manufacturing sector gained pace compared to September 2014 as the MCB PMI reading jumped by 5.26 points. With an ample gain of 9.8 points from September 2014, new orders index showed a reading of 76.6. Jump in new orders was complimented by an increase in production level by 5.2 points to 67.2 indicating improvement in consumer sentiment (after political impasse in August & September) and consumer demand. Consequently the inventory levels have also increased from a previous reading of 57.8 to 60.2 (2.4) to meet the upsurge in new orders.
The report said that manufacturers may have also taken advantage from decreasing commodity prices and build up their inventory level to meet future orders. Increased production led to an increase in new jobs in November 2014 as 14.5% employers added new jobs while only 1.6% manufacturers reduced their head count.
The notion of uptick in economic activity in November was supported by increase in supplier deliveries index by 3.8 points which shows slower deliveries than the previous reading. The prices paid and received index values of 64.0 and 64.8 (gap of 0.8 points) indicates that most manufacturers so far have refrained from passing the decrease in their cost of goods sold to the customers. This will lead to improved gross profit margins of the manufacturers in the current quarter. According to MCB the data presented herein is obtained from a survey of manufacturing managers based on information they have collected within their respective organisations.
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