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Strongest improvement in manufacturing conditions in India since December 2012

Staff Writer | January 4, 2018
The Indian manufacturing sector ended the year on a strong note, with operating conditions improving at the strongest rate in five years.
India manufacturing
India   Nikkei India Manufacturing PMI
The overall upturn was supported by the sharpest increase in output and new orders since December 2012 and October 2016 respectively.

In response to greater inflows of new business, job creation quickened to the greatest since August 2012.

On the price front, input cost inflation accelerated to the strongest since April and was marked overall.

Subsequently, firms raised their average selling prices at the fastest pace since February.

At 54.7 in December, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI ) rose from 52.6 in November.

This was consistent with the strongest improvement in the health of the sector since December 2012.

Notably, the PMI reading was slightly stronger than the average (54.0) recorded since the inception of the survey in March 2005.

At the broad market group level, growth was recorded across all three monitored categories (consumer, intermediate and investment).

The upward movement in the headline index was driven by a sharp increase in output.

Furthermore, the rate of expansion quickened to the strongest since December 2012.

Higher order book volumes and improved underlying demand conditions reportedly contributed to greater production.

Notably, the rate of growth outstripped the trend seen since the start of the survey.

New orders placed at Indian manufacturers rose for the second month in succession during December.

Furthermore, the rate of growth quickened to the sharpest since October 2016.

According to anecdotal evidence, new business inflows were underpinned by greater demand from home and 40 45 50 55 60 65 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Increasing rate of contraction 50 = no change on previous month, S.Adj.

Increasing rate of growth Nikkei India Manufacturing PMI Sources: Nikkei, IHS Markit.

international markets.

In turn, new export orders rose at the quickest pace since June.

Resulting from improved demand conditions, Indian manufacturers upped their staffing levels at the end of the year.

In fact, job creation accelerated to the strongest since August 2012.

In response to greater inflows of new orders, good producers were encouraged in December to engage in input buying at the sharpest rate since August 2015.

As a consequence, the sector observed a modest increase in pre-production inventories for the first-time since June.

Meanwhile, the introduction of the Goods and Services Tax (GST) continued to exert upward pressure on manufacturers’ cost burdens in December.

Furthermore, input cost inflation accelerated to the strongest since April and was sharp overall.

Reflecting greater cost pressures, firms raised their output charges for the fifth month in succession.

Although the rate of inflation quickened to a 10-month high, it was modest and weaker than the long-run series average. â–