InvestorQ : What does the latest PMI for May 2020 tell us about the economy?
Dhwani Mehta made post

What does the latest PMI for May 2020 tell us about the economy?

Answer
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Khushi Patel answered.
3 months ago


There was little surprise in that India’s manufacturing activity contracted in May largely on the back of weak demand and logistic challenges. The contraction was not as bad as April with some of the units resuming production. Manufacturing PMI stood at just 30.8 in May; marginally up from April's 27.4. PMI above 50 means expansion, while a score below 50 denotes contraction. What the latest reading indicates is that although the contraction is still on, there seems to be some improvement over April. But you will have to wait for the full impact to play out in the short term. This contraction in May was driven by the national lockdown coupled with a crash in export orders. Industrial activity did commence from April 20 but new orders were slow and labour constraints still remain. As a result, most businesses continued to cut back production. Weak demand from international markets only added to the deteriorating sales trend.