June PMI shows mfg weakness continues: SBI economist

Ekta: What do you think about the Purchasing Managers’ Index (PMI) for June?

A: The loss in the HSBC PMI manufacturing index momentum in June from the earlier months is a confirmation of the fact that the weakness in the manufacturing sector continues. In fact, our index has also shown a similar drop in the month of June.

On the flip side, the problem is that the lower credit growth is possibly impacting the manufacturing index. There is also some sort of a correlation across the monthly index and export growth. So we may not be surprised if export growth also falters in June. However, overall the outlook looks a bit bleak at this moment.

Ekta: How would you tie this into the core sector growth that came out last evening for the month of May which was at the best level since November 2014?

A: Basically for the month of April and May, we were expecting some traction in the index of industrial production (IIP) number. That was also reflected in earlier index of HSBC PMI and also the SBI Composite Index.

So May IIP numbers could still be encouraging and it could possibly be surprise on the upside but the point is that from the month of June onwards, for which the numbers have been released, the numbers may not be likely to sustain the momentum. So possibly some sort of a bleep in the numbers in the earlier months of April and May then possibly a downside.