December 2019: Manufacturing PMI Rises to 52.7

India’s manufacturing activity in December expanded to the highest level in the past seven months as a rise in factory orders boosted production and employment.

Despite a strong finish to the year, the degree of optimism was at its weakest in just under three years, reflecting worries about the pace of recovery.

The IHS Markit India Manufacturing Purchasing Managers’ Index rose to 52.7 in December from 51.2 in November. The figure matched the reading for May and was the ‘joint-strongest’ in the past 10 months. The index reading was 54.3 in February last year.

A reading of over 50 on this survey-based index indicates expansion, while a lower figure signifies contraction.

This is first set of upbeat data in many months for the Indian economy, which expanded at a six-year low of 4.5% in the July-September quarter.

However, due to a weak performance in October and November, the average reading for the third quarter was the lowest since the three months ended September 2017, the report showed. Capital goods, an indicator of investment activity, remained in contraction.

The manufacturing indicator comes before the government releases the first advance estimates of economic growth for 2019-20 on January 7. At the sub-sector level, growth was led by consumer goods, though intermediate goods also made a stronger contribution to the headline figure.

The PMI is based on a survey of purchasing executives in more than 400 companies, which are divided into eight broad categories — basic metals, chemicals & plastics, electrical & optical, food & drink, mechanical engineering, textiles & clothing, timber & paper, and transport.

The survey report showed that goods producers resumed hiring efforts in December, buoyed by strengthening underlying demand.

No comments: