Manufacturing shows marginal improvement in Dec, PMI inches up to 56.4

Manufacturing sector activities showed a marginal improvement in December compared to the previous month even as employment generation remained low, showed the widely-tracked IHS Markit purchasing managers’ index (PMI) survey.

inched up to 56.4 in December compared to 56.3 in November. However, it remained lower than 58.9 in October and 56.8 in September, the two months during which the economy saw a gradual lifting of lockdowns. A reading above 50 shows growth, while the print below 50 means contraction.

While firms were able to lift input stocks, and did so at the quickest rate in nearly a decade, holdings of finished goods decreased sharply due to the ongoing increase in new work. Output growth eased to a four-month low, but remains strong.

Manufacturing, in the Index of Industrial Production (IIP) rose by 3.5 per cent in October, according to the latest figures. However, it might come down going forward in line with results, warned Pollyanna De Lima, Economics Associate Director at IHS Markit.

Lima said,”The latest available official data pointed to a 3.5% annual increase in manufacturing production during October, when the Output Index had strengthened considerably. In the two months since, growth lost some momentum and we are likely to see the official results showing a similar pattern.”

One area that failed to show an improvement was employment, with jobs being shed once again at the end of 2020.

“Once again, the survey brought the bad of falling employment. However, the trend for jobs is at least moving

in the right direction as the rate of contraction softened to the weakest in the current nine-month period of reduction,” said Lima.

Meanwhile, a scarcity of raw material at the suppliers’s end caused delivery delays and the fastest rise in input costs for over two years.

Reflecting the loosening of Covid-19 restrictions, strengthening demand and improved market conditions, factory orders increased during December. In response, firms lifted production again. In both cases, rates of expansion remained sharp despite easing to four-month lows.

International demand for Indian goods rose in December, but anecdotal evidence indicated that growth was hampered by the Covid-19 pandemic. As a result, new export orders increased at the slowest pace in the current four-month sequence of expansion.

Input cost inflation accelerated to a 26-month high in December, with panellists noting increased prices for chemicals, metals, plastics and textiles. Output charges were raised in response to rising cost burdens, but in this case the rate of inflation was only marginal.

Manufacturers believe that output will increase in the coming year. However, the degree of optimism weakened to a four-month low as some firms were expressed concerns over the lasting effect of the Covid-19 pandemic on the global economy.

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