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Strongest improvement in manufacturing in India since October 2016

Staff Writer | December 4, 2017
The Indian manufacturing sector recorded its strongest improvement in business conditions for 13 months, recording marked and accelerated increases in output and new orders.
manufacturing in India
India   Nikkei India Manufacturing PMI
Furthermore, manufacturing companies observed a renewed increase in new export orders during November.

On the job front, greater production requirements led to the fastest rate of employment creation since September 2012.

Meanwhile, there was a pick-up in inflationary pressures, with input costs increasing to the greatest extent since April.

At 52.6 in November, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) rose from 50.3 in October.

This indicated a substantial improvement of operating conditions in India’s manufacturing sector.

At the broad market group level, growth in consumer and intermediate goods offset a marginal deterioration in investment goods category.

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

Furthermore, the rate of expansion quickened to the strongest since October 2016.

A combination of higher order book volumes and a decrease in GST rates reportedly contributed to greater production.

That said, the rate of growth remained weaker than the trend seen since the inception of the survey in March 2005.

Following the negligible decline in the prior month, new orders increased in November.

Although weaker than the long-run average, the rate of growth accelerated to the fastest in 13 months.

The only market groups category to not record a rise in new work was capital goods, as was the case with output.

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.

At the same time, overall new export orders increased for the first time in three months, albeit marginally.

It was a positive picture for factory employment in November, with manufacturers raising their payroll numbers at the sharpest rate since September 2012.

Panellists commented on greater inflows of new work.

All three monitored broad categories registered expansions, led by intermediate goods.

Amid reports of delayed payments by clients, outstanding business rose in November.

That said, the rate of growth was marginal.

Manufacturers attempted to replenish their input stocks by purchasing greater quantities of raw materials and semi-finished items in November.

That said, the overall rate of growth was modest and below the long-run series average.

Meanwhile, pre-production inventories declined for the fifth consecutive month in November.

On the price front, input cost inflation quickened to the fastest since April and was solid overall.

Among the items reported as being up in price were chemicals, steel and petroleum products.

While input prices rose at a stronger pace, the rate of output charge inflation was marginal.

Anecdotal evidence indicated that firms were unable to fully pass on higher cost burdens to customers amid intensive competitive conditions.