India's Manufacturing Contracts Sharply In Dec: Nikkei India PMI

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A monthly survey has showed that manufacturing sector contracted for the first time in 25 months in December as Chennai floods triggered significant decline in output and new orders. The survey further said that the rate of decline was the sharpest in almost seven years.

India's Manufacturing Contracts Sharply In Dec: Nikkei India PMI
The Nikkei India Manufacturing PMI, a composite monthly indicator of manufacturing performance, dipped from 50.3 in November to 49.1 in December.

As per reports, December's incessant rainfall in Chennai impacted heavily on the sector, with fall in new work leading the companies to scale back output at the sharpest pace since February 2009. Commenting on the development, Markit Economist Pollyanna De Lima told the media, "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 south of the country. Such was the extent of the decline that the rate of reduction was the sharpest since the financial crisis."

"The continued depreciation of the rupee against the US dollar pushed inflation higher, with PMI price indicators pointing to stronger increases in both input prices and output charges," Lima added.

Encouragingly, Indian goods producers hired additional workers in December. Anecdotal evidence highlighted expectations of an improvement in domestic demand in the near term.

That said, the rate of job creation was little-changed from the marginal pace seen in the previous month.

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