Manufacturing sector activity strengthened in December

Input cost inflation at 26-month high, export order growth fell to 4-month low

India’s manufacturing sector activity strengthened in December, with manufacturers stepping up production and input buying amid efforts to rebuild their inventories following business closures earlier in the year, a monthly survey said on Monday.

The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’’ Index (PMI) was at 56.4 in December, a tick higher than November’s reading of 56.3. A print above 50 means expansion, while a score below that denotes contraction.

“The latest PMI results for the Indian manufacturing sector continued to point to an economy on the mend, as a supportive demand environment and firms’ efforts to rebuild safety stocks underpinned another sharp rise in production,” said Pollyanna De Lima, Economics Associate Director at IHS Markit.

“It’s important to emphasise the broad-based nature of the recovery, with marked expansions in both sales and output noted across each of the three monitored sub-sectors,” she said. International demand for Indian goods rose in December, but the growth was hampered by the pandemic. As a result, new export orders rose at the slowest pace in the current four-month sequence of expansion. Output growth also eased to a four-month low, but remained strong.

Employment fell again, stretching the current sequence of job shedding to nine months. Input cost inflation accelerated to a 26-month high, with panellists noting increased prices for chemicals, metals, plastics and textiles. Output charges were lifted in response to rising cost burdens.

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