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Economic data or indicators provide measurements for evaluating the health of the economy. They also give us a fair view of the current business cycles, Investment and consumption patterns.

Economic Indicators are broadly categorized as Leading Indicators & Lagging Indicators.


Leading Indicators 

These Indicators indicate a change even before the economy factors the adjustments. They are based on current data & are forward looking , discount the current values according to future expectations. Stock Markets are the perfect example of a Leading Indicator.


Lagging Indicators

These Indicators reflect the economy’s  historical performance and confirm the trends with a time lag. They provide us a confirmation of where we are and where we have been.  Unemployment data is a lagging indicator. The unemployment rate may show increase even if the economy is recovering. Historically data suggests the Markets turn much before the Unemployment rate peaks.

Today we are going to discuss two important manufacturing data points


IIP Data

IIP Data is released by the Ministry of  Statistics & Programme Implementation of the 11 th day of the following month.i.e  the data for the month of Jan will be released on the 11th of March (a time lag of around six weeks).

It is a monthly data and expressed in a Year on Year (y-o-y) terms. The Base year for the calculation is 2004-05.

It compiles production data of 682 items covering broad sectors of mining (weight 14.2%), manufacturing (weight 75.5%) and electricity (weight 10.3%).   The data is sourced from sixteen different government agencies.



HSBC PMI data is complied by Markit (HSBC) on a monthly basis and is based on a survey of Purchase Managers of companies.

It is a seasonally adjusted Month on Month (m-o-m) indicator.

The PMI data is released shortly after the end of the reference period .i.e. the data for the month of Jan is released on the 1st or 2nd of February.

It is a survey based indicator covering only private sector companies. It is a composite of five indices New orders  30%, Output 25%, Employment 20%, Supplier’s delivery time 15%, Inventories 10%.


Which data should you refer to :

Both the data are not strictly comparable because of their divergent nature.

  • IIP is based on actual production data while PMI is based on business expectations
  • IIP is highly volatile as it is not seasonally adjusted and impacted by the base effect.

The PMI data is considered an important  macro-economic indicator. Despite being a perceived Index based on business expectations, the data is more stable compared to IIP.

PMI data is  the first important data released every month and highly watched data. It is considered as a Leading Indicator given its insight into sales, employment, output, inventory and pricing in the sector. But being built on business expectations, it can have in-built biases.


Current View on the Manufacturing Sector

The Recent data of HSBC PMI for the month of January suggests that the manufacturing activity has improved led by new orders. New Export Business has also increased at quickest pace since June 2013. The Input costs in the month of January have risen. Though the companies have raised output charges but the rise is much weaker than the rise in input cost.

The IIP data for the month of December will be announced on 11th Feb and is expected to be better as the core  industries data for December grew by 2.1%

Inflationary pressures in India are firm and therefore the sector may still face tough times ahead.