Extending the trend of growth, manufacturing activity in India accelerated at a swift pace in the month of December to hit 5 year high, on the back of improved operating conditions and strong production. The substantial inflow of new orders too underpinned the expansion in manufacturing sector. However, Goods and Services Tax (GST) continued to exert upward pressure on manufacturers’ cost burdens in December.
As per the survey report, the seasonally adjusted Nikkei India Manufacturing Purchasing Managers’ Index (PMI)-a composite single-figure indicator of manufacturing performance- rose to 54.7 in December from 52.6 in November, indicating a healthy growth in manufacturing sector since December 2012. The reading signaled an expansion for the fifth consecutive month, remaining above the no-change mark of 50.0.
In line with improved manufacturing activity, the employment growth also accelerated to the strongest since August 2012, on the back of favorable demand conditions in domestic and international markets. In the month of December, the new orders grew at sharpest rate since October 2016, while the new export orders rose at the quickest pace since June.
On the price front, rising input costs continued to spark cost pressures on manufacturers and to pass on their cost burdens, firms raised output charges for the fifth month in succession. Further, the inflation rate rose to a 10-month high, but was modest and weaker than its long-run series average.