John Samuel Raja D: Domestic demand is picking up

Business confidence in India has seen a dramatic improvement in the last two months, primarily after the results of last general elections that brought a more stable coalition at the centre. The Purchasing Manager’s Index (PMI) for India increased for the second consecutive month in May to touch 53, reflecting the expansion of manufacturing owing to strong domestic demand. PMI is a survey of 500 purchasing managers of manufacturing firms on new orders, output and employment, and an index greater than 50 indicates expansion. Is this change in business and consumer confidence confined only to India and China, or is it widespread?

Confidence indicators maintained by the Organisation for Economic Co-operation and Development (OECD) for more than 30 countries — these account for more than 80 per cent of world’s output — show that most of the world’s biggest economies have shown an uptrend in business confidence levels in the last two months. In OECD’s business confidence indicator (BCI), only one (Korea) out of 34 nations has shown month-on-month decline in May against 23 in January. Similarly, in consumer confidence indicator (CCI), only one country (Germany) showed negative against 22 in January. These trends point to an imminent global recovery, possibly by October 2009.
 

OECD signals a marked uptrend
	9-Jan	9-Feb	9-Mar	9-Apr	9-May
BUSINESS CONFIDENCE INDICATOR (BCI)*
Positive growth	6	6	11	22	22
Negative territory	23	23	17	3	1
CONSUMER CONFIDENCE INDICATOR (CCI)**
Positive growth	7	5	14	18	19
Negative territory	22	23	12	4	1
data shows the number of countries that are showing positive growth * Data available for 34 countries ** Data available for 30 countries Source: OECD dataset