Economic activity in the manufacturing sector expanded in July 2014 at a slightly faster pace than in May 2014, say the company executives in the MCB Purchasing Managers Index (PMI).
The MCB PMI reading was registered at 64.26 for the month of July2014. A reading above 50 shows expansion in the manufacturing sector and economy. New orders and production indices reported a value of 73.4 and 68.4 respectively. The employment index registered a reading of 55.9 while the prices paid and prices received indices showed the readings of 59.3 and 62.0 respectively.
Manufacturing expanded in July as the MCB PMI index registered a reading of 64.26. July 2014 reflects the 4th consecutive reading of growth in the manufacturing sector but at a somewhat faster pace than the previous reading of May. 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.
Therefore, the July 2014 PMI indicates growth for the 4th month in the overall economy and expansion in Pakistan’s manufacturing sector.
New Orders
New Orders Index registered a reading of 73.4 in July 2014. This represents growth in the new orders index for the 4th consecutive reading at a faster pace than the last value recorded in May 2014.
Production
Production Index registered a value of 68.4 in July 2014 which showed an increase of 1.0 compared to the previous reading of 67.4 in May 2014.
Employment
MCB PMI Employment Index registered a reading of 55.9 in July. The MCB PMI survey shows the slowdown in the pace of employment in July 2014 as compared to the previous reading of 57.2 in May 2014.
Supplier Deliveries
Companies reported slower delivery but faster than previous month as the index value dropped from 53.3 in May to 52.9 in July 2014 for the 4th MCB PMI reading. A number below 50 indicates faster deliveries and cooling down of the economy, while a reading above 50 indicates slower deliveries and growing economy.
Inventories
The Inventories Index recorded a number of 60.4. The July 2014 index value shows a drop of 2.2 from index value of 62.6 in May. This indicates that respondents have reported a drop in inventory levels in July to meet the higher consumer demand due to Ramazan and Eid.
Prices
In July the MCB Prices Index registered a reading of 59.3 and 62.0in prices paid and prices received respectively. This indicates that companies paid lower prices for the manufacturing materials to their suppliers than they received from the customers thus passing the higher prices paid by the manufacturers in the previous reading (May 2014) to the customers. The survey’s price indicator suggests easing of the cost pressure that we saw in the previous MCB PMI prices index in May 2014 as prices received index value increased by 3.5 while the prices paid index value decreased by 6.1 in July.
