Economic activity in the manufacturing sector expanded in January 2015 almost at the same pace as that of November 2014 and MCB Purchasing Managers Index (PMI) for January 2015 remained almost unchanged at 65.39 compared to 65.65 in November 2014.
According to MCB PMI report a good reading enhances the attractiveness of an economy. 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 anemic and flat.
According to the report in January 2015 MCB PMI indicates that the pace of growth in the manufacturing sector remained static since November 2014 as the MCB PMI reading reduced negligibly by 0.26 points. New orders index showed a reading of 76.4 which showed a meagre decline of 0.2 points from November 2014. On the other hand production level increased by 0.9 points to 68.1 indicating slight pickup in consumer demand.
This led to an increase in the inventory levels by 2.9 points to 63.1(previous 60.2). Manufacturers have also taken advantage from decreasing commodity prices to build up their inventory level to meet future orders. Smooth supply chain operations led to a faster delivery time as compared to November 2014. The major shift was seen in prices paid and prices received index values as they both dropped by 9.6 and 7.6 points, respectively. This is due to lower oil and commodity prices. The lower prices will help boost consumer purchasing power and suppress inflationary pressure, the report said.