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India's manufacturing PMI dips for 1st time in over 2 yrs
05
Jan '16
India's manufacturing activity contracted for the first time in two years, dragged down by the impact of the Chennai floods and falling new orders, according to a business survey released on January 4.

The Nikkei India Purchasing Managers' Index (PMI) - a composite indicator of manufacturing performance - fell to 49.1 in December 2015 from 50.3 in November. The 50-point mark separates contraction from expansion. The PMI is a survey based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 300 industrial companies.

This is the first time since October 2013 that the manufacturing Purchasing Managers' Index (PMI) has come below 50. The rate of contraction was the sharpest in almost seven years.

The devastating rainfall in Chennai in December impacted the manufacturing sector, with falling new work forcing companies to scale back output at the sharpest pace since 2009, the Survey report said.

Latest available data shows industrial output growth rose to a 5-year high of 9.8 per cent in October. The industrial output data comes with a lag and the November numbers will be released later in the month. Exports have remained weak and have fallen for 12 consecutive months due to muted global demand.

"India's manufacturing sector took a turn for the worse at the year end, with already-gloomy internal demand further hampered by floods in the country. Ending a 25-month sequence of growth, production plummeted in December. Such was the extent of the decline that the rate of reduction was the sharpest since the financial crisis," said Pollyanna De Lima, economist at Markit, a global, financial information and services company which carried out the survey for Nikkei.

Following the Fed rate hike and expectations of further increases, more currency weakness is anticipated, adding strain to businesses' dollar-priced debt and import costs, Lima added.

The consumer goods bucked the sub-sector trend and was the only category to see improving business conditions in December as production and new orders rose. Conversely, incoming new work and output fell in both the intermediate and investment goods market groups. (SH)

Fibre2Fashion News Desk - India

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