India: The private sector expansion slows in December but remains strong
January 4, 2019
The composite Purchasing Managers’ Index (PMI) produced by Nikkei and IHS Market fell to 53.6 in December from 54.5 in November. Despite the lower PMI reading, it remained well above the 50-point threshold that separates expansion from contraction in the private sector.
The services PMI decreased to 53.2 in December from 53.7 in November. The slower expansion in the services sector was due to moderated sales growth compared to November, although sales still expanded at one of the fastest rates in the past one-and-a-half years, driven by domestic client demand. Despite service providers taking on extra staff in December at the fastest pace since April, outstanding business still increased, although the accumulation of backlogs was the weakest in five months. In terms of prices, output prices increased at a three-month-high pace in December, whereas input prices were little changed. Forward-looking business sentiment, meanwhile, rose to a three-month high in December as firms saw promising prospects from recent advertising efforts, new service offerings and predictions of an improvement in market conditions after the general elections early in 2019.
The manufacturing PMI fell to 53.2 in December from 54.0 in November, due to lower output growth compared to November and teething problems on the production line, with backlogs of work accumulating at the fastest pace since May despite higher employment levels. In turn, holdings of manufactured goods decreased in December as firms tried to fulfil orders. However, input pre-production inventories rose again in December, largely due to the joint-fastest pace of input purchasing in 11 months. In terms of prices, input price inflation slowed to a 34-month low, while output prices were unchanged in December. Meanwhile, forward-looking business confidence moderated compared to November.
Author: Edward Gardner, Economist