Manufacturing to see traction in few months: SBI tracker

SBI Composite Index will capture two components of the manufacturing cycle namely month-on-month and y-on-y growth

Signs of a gradual pick-up in action on the industrial front are becoming visible and the next couple of months could see traction in manufacturing activity, according to State Bank of India (SBI)’s new economic activity tracking index.

Based on its internal loan portfolio and data available in public domain, SBI — India’s largest lender — has developed a conservative robust forward-looking economic indicator, the SBI Composite Index, for tracking primarily manufacturing activity in the country.

SBI will publish the indicator on a monthly basis. This indicator will track two months in advance the possible trends in official estimates.

SBI Composite Index will capture two components of the manufacturing cycle — month-on-month and year-on-year growth. Accordingly, two separate indices have been constructed and both the indices are on a scale of 0 to 100. An index above 50 implies growth over the previous respective period and less than 50 suggests a contraction.

The yearly composite index score moved up to 50.5 in December 2014 from 50.1 in November. While monthly index rose to 55.4 in December from 47.5 in previous months.

Arundhati Bhattacharya, chairman of SBI said: “The Index will analyse data from both manufacturing and services industries to determine expansion or contraction in the economy. The SBI Composite Index will help policy makers, market participants and the like to identify the turning points in the manufacturing cycles in advance and adjust their investment or marketing strategy.”

This forward-looking indicator takes into account detailed activity in consumer spending, mining, interest rates, inflation, exchange rates, SBI lending, and performance of various thematic indices.