Signs of Recovery

India's manufacturing sector activity improved to a four-month high in January with the seasonally-adjusted Nikkei India Manufacturing Purchasing Managers' Index (PMI) climbing into expansion territory after the contraction seen at the end of last year.
The index posted a reading of 51.1 in January, compared with 49.1 in December. A reading above 50 denotes expansion.
Separately released government data showed the core sector grew a marginal 0.9% in December, reversing the 1.3% contraction in November output. This indicates industrial production growth, as measured by the Index of Industrial Production (IIP), may also bounce back in positive territory after hitting a four-year low of -3.2% in November. The core sector index has a 38% weight in IIP.
The data come a day before the RBI's monetary policy review, in which experts do not expect a change in the key policy rates.
India's manufacturing sector performance was in sharp contrast to a deterioration in activity in the region. Data revealed that while there was a general deterioration in manufacturing in Malaysia, the downturn continued in Indonesia and China showed `modest deterioration'.The Nikkei manufacturing PMI for South Korea indicated worsening operating conditions. Developed countries looked a mixed bag with PMI in France at a five month low while the UK showed an uptick in manufacturing sector activity.
The data showed that levels of production and total new business registered mild increases following contractions in the prior survey month.
The consumer goods sub-sector remained the principal growth engine at the start of the year, seeing substantial expansions of both output and new orders.
In contrast, producers of investment goods saw a fall in output and new orders, while production volumes stagnated in the intermediate goods category.
The levels of incoming new export business rose for the 28th month running. Although there was some job creation in January, the survey noted that this increase was insufficient to reduce the pressure on manufacturers' capacity.

The mild recovery in the core sector output was largely on the strength of a sharper 6.1% growth in coal output in December and continued robustness in fertilser production (13.1%). Cement output was up 3.2% while electricity generation rose 2.7%.
Crude oil (-4.1) and natural gas (-6.1%) production contracted in December. Refinery output was up marginally at 2.1% in December.