India: Private sector expands at fastest pace in five months in December
January 6, 2020
The composite Purchasing Managers’ Index (PMI) produced by IHS Markit increased to 53.7 in December, up from 52.7 in November and representing the highest reading in five months. A reading above 50 indicates a rise in business activity since the previous month.
The services PMI climbed to 53.3 in December from 52.7 in November due to faster increases in sales and output. Employment also rose at the fastest pace since August, although the rate of increase remained modest. Despite higher headcounts, capacity pressures appeared to increase at service businesses, as suggested by another increase in outstanding business. In terms of prices, input costs increased at the fastest pace in nearly seven years in December, partly due to higher prices for fuel, resulting in the fastest output charge increase in nearly two years. Forward-looking business confidence among service businesses rose to a four-month high.
On the manufacturing side, the PMI jumped to 52.7 in December from 51.2 in November as new orders rose at the fastest pace in five months, spurring production and hiring increases. Manufacturers also increased input buying marginally in December, marking the first increase in five months, while stocks of input and finished goods both depleted. In terms of prices, input cost inflation accelerated to a 13-month high in December, pushing output charge inflation to a nearly three-year high. Turning to the outlook, manufacturers turned notably less optimistic about operating conditions in the coming 12 months.
Commenting on how the latest PMI readings shape up for economic growth, Pollyanna de Lima, principal economist at IHS Markit, said: “Growth looks set to be sustained [in October–December], but at an unspectacular rate, with the latest quarterly PMI Composite Output Index reading broadly in line with that recorded in the three months to September.”
Author: Edward Gardner, Economist