India’s manufacturing growth revived in the first month of 2017 coming from a contraction in December triggered by the government's scrapping of high value banknotes. The growth was supported by the increase in order books, production and buying levels. The seasonally adjusted Nikkei India Manufacturing Purchasing Managers' Index (PMI) - a composite single-figure indicator of manufacturing performance - rose to 50.4 in January from 49.6 in December. As per the report, a reading above 50 indicates economic expansion.
The report stated that greater production needs encouraged companies to purchase more inputs, but failed to generate jobs in the sector. On the price front, it said that input cost inflation climbed to its highest mark since August 2014, while output charges were raised for the eleventh successive month. Also, rates of expansion were only slight, but reversed the contractions noted in December. In contrast to the upturn in total new business, new export orders fell again. As per the report, intermediate goods were the bright spot in January, with rates of expansion in both new work and production outstripping those seen in the consumer goods sector, and investment goods dipped into contraction.
The survey data pointed to an increasing degree of pressure on the capacity of manufacturers’ operations as backlogs rose at a quicker rate than in December. In spite of this, companies kept their payroll numbers unchanged in January. Additionally, holdings of finished goods decreased in January, amid evidence from survey participants of orders being fulfilled directly from stocks. The rate of depletion was marked, and the quickest since last May. Concurrently, pre-production inventories declined slightly, but at a pace that was the fastest in over three years.