Man­u­fac­tur­ing sec­tor ac­tiv­ity slows to 53.2 in De­cem­ber

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In­dia’s

man­u­fac­tur­ing sec­tor ac­tiv­ity in De­cem­ber slowed down from the pre­vi­ous month, but ended the pre­vi­ous year on a high as com­pa­nies con­tin­ued to ex­pand pro­duc­tion and em­ploy­ment in re­sponse to strong in­flows of new busi­ness or­ders, a monthly sur­vey said on Wed­nes­day, 2 Jan­uary.

The Nikkei In­dia Man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex (PMI) eased to 53.2 in De­cem­ber, from 54 in Novem­ber.

De­spite the eas­ing from Novem­ber, the in­crease in pro­duc­tion was among the quick- est seen in the pre­vi­ous year.

This is the 17th con­sec­u­tive month that the man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex re­mained above the 50-point mark.

In Pur­chas­ing Man­agers’ In­dex par­lance, a print above 50 means ex­pan­sion, while a score be­low that de­notes con­trac­tion.

“The In­dian Man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex in­di­cated that the sec­tor ended 2018 on a high, with growth stronger than seen at the start of the year,” Pollyanna De Lima, Prin­ci­pal Economist at IHS Markit and au­thor of the re­port said, adding that com­pa­nies ben­e­fit­ted from grow­ing in­ter­na­tional de­mand for In­dian goods as ex­port or­ders ex­panded for the four­teenth straight month. The De­cem­ber Pur­chas­ing Man­agers’ In­dex fig­ure was the sec­ond high­est in 2018 and con­trib­uted to the high­est quar­terly av­er­age since the third quar­ter of fi­nan­cial year 2012.

“It’s par­tic­u­larly en­cour­ag­ing to see the quar­terly Pur­chas­ing Man­agers’ In­dex av­er­age climb to its high­est mark since the third quar­ter of fis­cal year 2012, sug­gest­ing that the sec­tor made a ro­bust con­tri­bu­tion to gross do­mes­tic prod­uct (GDP),” Lima added.

On the prices front, there was a no­table slow­down in in­put cost in­fla­tion to a 34-month low.

“Th­ese signs of eas­ing in­fla­tion­ary pres­sures in­di­cate that we are likely to see the Re­serve Bank of In­dia (RBI) adopt an ac­com­moda­tive mone­tary pol­icy stance in early 2019,” Lima said.

The next meet­ing of the Re­serve Bank of In­dia’s Mone­tary Pol­icy Com­mit­tee is sched­uled for be­tween 5 and 7 Fe­bru­ary.

Mean­while, job cre­ation weak­ened, with com­pa­nies turn­ing cau­tious about mak­ing hir­ing de­ci­sions ahead of the gen­eral elec­tion athat is sched­uled for later this year and a less up­beat op­ti­mism to­wards the em­ploy­ment out­look.

Look­ing ahead, the com­pa­nies pre­dicted that mar­ket­ing ini­tia­tives, ca­pac­ity ex­pan­sions and fore­casts of fur­ther im­prove­ments in de­mand will boost out­put in the new year.

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