India’s manufacturing PMI decelerates to 55.5 in December
The manufacturing PMI for India registered a deceleration in December, to 55.5 from 57.6 in the previous month. The decline in the PMI comes after three months of consistent growth, even though it continues to remain in the expansionary phase, since it remains above the 50-mark. With the spread of the new COVID-19 variant, many parts of the country are reintroducing lockdowns, which has impacted the economic recovery process and dampened consumer sentiment.
The output index declined to 58.4 in December, from 61.9 in November. Over the same period, both new orders and new export orders also climbed downwards, to 58.4 by 2.9pts and 51.3 by 0.4pts, respectively. Stocks of purchases index dropped from 60.4 in November to 57.4 in December. The quantity of purchases also followed suit and decreased from 60.8 to 58.1. However, stocks of finished goods registered a growth, from 48.3 to 44.7. The backlogs of work index also registered an increase, from 49.4 to 49.9. These, along with the fall in employment index to 49.9, suggest that manufacturing activity in India witnessed a slowdown. Orders to inventories ratio in November continued to increase, most likely due to the festive season in India. However, capacity utilisation decreased in the same month, from 50.8 to 50.3, the lowest since February 2020, before the pandemic started in India, showcasing a merge to its pre-pandemic levels. However, in the light of new restrictions in the nation, capacity utilisation may increase.
Supplier delivery times index also decreased by 1.2pts, to 47.9 in December. Both input and output prices indices underwent a second consecutive slowdown in December, recording similar level of decline, 1.3pts for input prices to 58.8, and 1.1pts for output prices to 51.0. It is interesting to note that while the PMI and all components slowed in December, it wasn’t radically lower, and in fact, matched levels seen in October. This gives rise to the assumption that the spike in manufacturing activity in November could be a result of the festive season in India which has now normalising.
Further data and analysis on India’s economy are available on the CEIC India Economy in a Snapshot – Q4 2021 report.