India: The private sector expands at a steady pace in January
February 5, 2019
The composite Purchasing Managers’ Index (PMI) produced by Nikkei and IHS Market was unchanged in January at December’s 53.6 reading, which was above the 50-point threshold that separates expansion from contraction in the private sector.
Although the overall PMI reading held up in January, the services PMI weighed it down because it fell to 52.2 from 53.2 in December. The weaker services PMI in January was due to the softest increase in the amount of new work in four months, with slower growth in new orders in the domestic economy specifically; new orders from abroad grew at the fastest pace in four months, however. Employment in the services sector increased at the quickest rate in three months in January. However, the higher headcount did not prevent an accumulation of outstanding business in January for the 32nd consecutive month. In terms of prices, input cost inflation accelerated to a three-month high in January, although output charges were unchanged. Looking ahead, service providers remained optimistic regarding future business prospects in January, although optimism faded to a three-month low.
The manufacturing PMI, for its part, rose to 53.9 in January from 53.2 in December, as production rose on the back of the fastest increase in new orders in 13 months. New orders were boosted by solid domestic and external demand, although export growth moderated slightly. Manufacturers sought to rebuild their inventories in January, buying up additional inputs and creating additional jobs. Backlogs of work increased slightly in January. In terms of prices, input costs were largely stable in January, as higher prices for paper, textiles, steel and synthetic rubber were balanced out by lower aluminum, copper, oil and plastic prices. There was only a slight increase in output charges in January. Meanwhile, manufacturers registered the highest level of forward-looking optimism in five months in January, buoyed by forecasts of greater sales, favorable economic conditions and planned investment in marketing.
India Fixed Investment Forecast
FocusEconomics Consensus Forecast panelists see fixed investment rising 8.3% in FY 2019, which is up 0.6 percentage points from last month’s forecast. For FY 2020, the panel expects fixed investment to also increase 8.5%.
Author: Edward Gardner, Economist