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Oct 01, 2012, 07.46 PM IST
Manufacturing Purchasing Manager’s Index (PMI) is a leading indicator of economic health of an economy. It measures diffusion index based on surveyed purchasing managers in the manufacturing industry. A reading above 50 indicates expansion while below 50 indicates contraction.
The on-going euro zone crisis has taken a toll on the world economies as the manufacturing growth has hampered against the backdrop of reduced consumption and spending power of the people. Euro zone manufacturing PMI shrinking for the third consecutive month in September has only renewed concerns of ‘new recession’ in the distraught region. The rise to 46.1 in September notwithstanding, the factories were hit hard by falling demand despite cutting prices. On-going protests by the people in Spain and Italy against the austerity measures will only result in a deadlock. The weakness was also reflected in the UK and US PMIs. With expectation of US PMI printing at 49.8 in a data to be released later today, the global slowdown would be confirmed. Even the dragon country posted contraction of 49.8 in the last month owing to falling exports to other countries. All in all, the key economies have exhibited manufacturing at below 50 mark in the last quarter, which acts as a dividing line between expansion and contraction. The governments collectively will have to provide more stimulus to their respective economies to boost growth going ahead.
Below graph represents manufacturing PMIs of Key world economies for the last three months.
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