Economic activity in the manufacturing sector expanded in November 2014 at a faster pace than in September 2014, say the company executives in the MCB Purchasing Managers Index (PMI).
The MCB PMI reading was registered at65.65 for the month of 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.
MCB PMI:
Manufacturing expanded in November as the MCB PMI index registered a reading of 65.65.November 2014 reflects the 6thconsecutivereading 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 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 November 2014 PMI indicates growth for the 6thmonth in the overall economy and expansion in Pakistan’s manufacturing sector but at a faster pace.
New Orders
New Orders Index registered a reading of 76.6 in November 2014. This represents growth in the new orders index for the 6thconsecutive reading but at a faster pace than the last value recorded in September 2014 (66.8).
Production
Production Index registered a value of 67.2 in November2014 which showed an increase of 5.2 compared to the previous reading of 62 in November 2014.
Employment
MCB PMI Employment Index registered a reading of 56.5 in November. The MCB PMI survey shows a slight increase in the pace of hiring in November 2014 as compared to the previous reading of 55.3 in September2014 due to the uptick in production levels.
Supplier Deliveries
Companies reported a slightly slower delivery time as the index value increased from 53.2 in September 2014to 57.0 in November 2014for the 6thMCB PMI reading. The slower delivery time indicates the surge in economic activity, as the new order and production increases, putting suppliers under pressure. 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 60.2. The November 2014 index value shows an increase of 2.4 from index value of 57.8 in September. This increase in inventory level is in line with the production level sub-indicator which also increased by 5.2 to fulfill new orders which increased by 9.8 points.
Prices
In November the MCB Prices Index registered a reading of 64.0 (previous 67.9) and 64.8 (previous 65.0) in prices paid and prices received respectively. This indicates that companies paid lower prices for the input materials (primarily oil) to their suppliers in November than they did in September 2014. Although this decline in their input prices is yet to be passed to their customers fully as many manufacturers (50.0%) kept the prices received unchanged. This would improve their gross profit margins (reduced cost of goods sold) if the manufacturers refrained from passing the benefit of lower input prices of their customers.
