India Manufacturing PMI Falls In December; Rising Input Costs A Worry

The release by IHS Markit suggests that December has been a good month for the Indian manufacturing industry with growth in new work and production continuing to be sharp despite losing momentum. "Companies continued with their stock-building initiatives, as evidenced by another robust upturn in buying levels. Business confidence strengthened, but sentiment was again dampened by concerns surrounding supply-chain disruptions, COVID-19 and inflationary pressures", said the release.

At 55.5 in December, the seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index® (PMI®) pointed to a robust improvement in overall operating conditions that was elevated by historical standards. This was despite the headline figure slipping from November's ten-month high of 57.6. Moreover, the latest quarterly reading was at 56.3, its highest since the final quarter of fiscal year 2020/21.

Commenting on the latest survey results, Pollyanna De Lima, Economics Associate Director at IHS Markit, said: "The last PMI results of 2021 for the Indian manufacturing sector were encouraging, with the economic recovery continuing as firms were successful in securing new work from domestic and international sources. Higher sales underpinned a further upturn in production and companies carried on with their restocking efforts.

"Manufacturers were optimistic that output would continue to increase in 2022, but business sentiment was somewhat tamed by worries surrounding the path of the pandemic, inflationary pressures and lingering supplychain disruptions. "There were tentative signs that inflationary pressures started to subside, but companies weren't particularly confident that such trend would continue. Despite easing in December, input cost inflation was still running at one of its highest rates in around seven-and-a-half years. The vast majority of firms nevertheless decided to keep their selling prices unchanged, in order to boost sales, with overall charges up only marginally in December."