February PMI points to continued expansion

• Respondents upbeat over upcoming festival demand
• Manufacturing index at 56.0 & services at 53.0 

Signalling continued expansion in economic activities, Purchasing Managers’ Index (PMI) for both manufacturing and services recorded persistent gains in February with expectations for the next three months remaining upbeat, especially due to the upcoming traditional New Year season.

According to the PMI index released for February by the Central Bank, the manufacturing sector recorded an index value of 56.0 while of the services it reads 53.0.

In January, the two respective values were 55.6 and 60.1.
In PMI, an index value of 50.0 splits an activity between a decline and an expansion while a value of 50.0 shows a neutral level.
In February, manufacturing sector expansion was helped by all sub-indices, reflecting that this segment which went through a prolonged dip is finally heading for sustained growth.
The manufacturing sector decline was also shown by the 2023 Gross Domestic Product estimates due to sporadic jumps in prices, higher overall input costs, subdued demand conditions and higher borrowing costs which prevailed until recently.
The February manufacturing sector gains have mainly been led by the food and beverage sector as producers are preparing for the upcoming festive demand.
However, apparel and textiles appears to still remain a sour spot as new orders and production in the sector had declined on a month-on-month basis.
Meanwhile, employment and stock of purchases have expanded in February in line with new orders and production while the suppliers’ delivery time had continued to lengthen in tandem with the expansion in manufacturing activities and prolonged shipping disruptions caused by the tensions in the Red Sea.

Meanwhile the services sector too mirrored the manufacturing which has been buttressed by the financial services due to the declining interest rates and the appetite by both the lenders and the borrowers to give and take loans.  
This was followed by the transportation and education sub-sectors and more notably by the continued growth in accommodation, food and beverage sub-sectors amid substantially higher tourist arrivals.
Meanwhile, the employment sub-sector, perhaps the most watched category, grew due to new recruitments made by companies ahead of the festival season.
As nobody has cited the challenges from the recent value added tax hike, it appears that the effects are tapering off while the quite a sharp appreciation in the rupee seen so far this year has more than offset the impact from the tax hike as some of the goods’ prices came down while energy and electricity prices were slashed too.
Year-to-date, the rupee has appreciated by 6.0 percent, on top of the 12.0 percent gain in 2023.