Bengaluru: India’s manufacturing sector ended 2021 on solid footing, with new order growth and production remaining sharp despite losing some momentum in December, but heightened price pressures were still a concern, a private survey found .
The Manufacturing Purchasing Managers’ Index, compiled and collected by IHS Markit from December 6-17, fell from 57.6 in December to 55.5 in December, though it remained above 50 separating growth and contraction for a sixth month.
The survey results bolster evidence of an ongoing recovery of Asia’s third-largest economy from the slump caused by the coronavirus pandemic. That and mounting price pressures may raise expectations that the Reserve Bank of India will tighten monetary policy sooner than expected, like some other central banks.
“The latest 2021 PMI results for the Indian manufacturing sector were encouraging, with the economic recovery continuing as companies managed to bring in new work from domestic and international sources,” said Pollyanna De Lima, associate economic director at IHS Markit. in a press release. .
“Higher sales fueled a further rebound in production and companies continued to restock.”
While the latest survey showed that the new orders sub-index, a measure of domestic demand, fell to 58.4 in December, it has remained above its long-term average since the gauge was introduced in March 2005. That encouraged companies to maintain solid production.
Optimism about future production rose last month, but concerns about supply chain disruptions, the rapid spread of the new Omicron variant of the coronavirus and inflationary pressures dampened sentiment.
Employment fell back into a contraction zone last month after growing in November for the first time since July; however, the rate of job losses was marginal.
While input costs rose sharply at a above-trend pace, output price inflation declined to a 14-month low as businesses did not shift the burden entirely on consumers.
“There were tentative signs that inflationary pressures were starting to ease, but companies were not really confident that such a trend would continue,” added De Lima.
“Despite easing in December, input cost inflation was still at one of its highest levels in about seven and a half years. The vast majority of companies nevertheless decided to keep their selling prices unchanged to boost sales, with the total costs increased only marginally in December.”