MCB Bank PMI for January 2016 increases to 64.54
Economic activity in the manufacturing sector expanded in January 2016 at a faster pace than in November 2015, according to company executives surveyed in the MCB Bank Purchasing Managers Index (PMI). The PMI for the month of January registered a value of 64.54, an increase from November's reading of 63.25. As a rule of thumb, a reading of 50 or above indicates that manufacturing activity and the overall economy expanded.
At present, the manufacturing sector appears to be growing at a solid pace with Large-Scale Manufacturing (LSM) increasing on a year-onyear basis by 4.43% in the Jul - November FY16 period, according to Pakistan Bureau of Statistics. Moreover, credit to private sector increased by Rs. 339.8 billion during H1-FY16 due to the benefits of monetary easing, improving financial conditions of the corporate sector and a general uplift in business environment in the country, according to the State Bank of Pakistan.
Crucially, firms were encouraged to avail credit not only to finance working capital but also fixed investments which will produce further expansion in the manufacturing sector going forward. On the downside, a weak cotton harvest and declining exports continue to weigh in on growth prospects as highlighted by the International Monetary Fund at the conclusion of the Tenth Review of the Extended Fund Facility (EFF) earlier this month. Pakistan's exports, in particular, have declined by 14.37%, in dollar terms from July - January FY16 when compared with the corresponding period of the previous fiscal year, according to the Pakistan Bureau of Statistics.
The January MCB Bank PMI indicates that manufacturing activity continued to grow for the 13th consecutive reading and at a much faster pace compared to November. New orders increased at a faster pace in January, registering an index value of 73.06, compared to 70.56 in November while Production Level increased 1.94 points to 69.17. With sales and production levels both accelerating further, finished inventories followed a similar trend as manufacturers increased inventories in anticipation of future demand. The inventories index increased from 61.67 to 61.94.