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Manufacturing PMI rises to 54.7 during December

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Nikkei India Manufacturing Purchasing Manager’s Index (PMI) rose to 54.7 in December 2017 from 52.6 in November on the back of robust improvement in the health of the sector since December 2012.

A reading above 50 indicates expansion and one below 50 shows contraction in production. The upward movement in the headline index was driven by a sharp increase in output.

“Operating conditions for manufacturing in India improved at the strongest rate in five years during December 2017...Notably, the PMI reading was slightly stronger than the average (54.0) recorded since the inception of the survey in March 2005. At the broad market group level, growth was recorded across all three monitored categories (consumer, intermediate and investment),” Nikkei India said in a release.

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Volumes of pre-production and semi-manufactured goods rose in December, thereby ending a five-month sequence of contraction. The rate of expansion was modest overall. Survey respondents linked higher inventory to strong demand levels. Investment goods was the only category to record a fall in the stocks of purchases, the statement added.

Commenting on the Nikkei India Manufacturing PMI data, Economist at IHS Markit, Aashna Dodhia, said: “The sector continues to face some turbulence as delayed customer payments contributed to greater volumes of outstanding work. On the price front, Goods and Services Tax (GST) continued to lead to greater raw material costs, with input cost inflation accelerating to the sharpest since April. As consumer spending recuperates, firms were restricted in their ability to pass on higher cost burdens to clients which further placed upward pressure on firms’ margins.”

“Challenges remain as the economy adjusts to recent shocks, but the overall upturn was robust compared to the trend observed for the survey history. This outlook was shared by the manufacturing community as sentiment picked up to the strongest in three months amid expected improvement in market conditions over the next 12 months,” Dodhia added.