Manufacturing contracts for the first time after more than 2 years

NEW DELHI: Ending a 25-month sequence of growth, production plummeted in December with the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) posting below the no-change level of 50.0 for the first time since October 2013.

Manufacturing PMI dipped from 50.3 in November to 49.1 in December. A reading above 50 on this survey-based index shows expansion, while a figure below that indicates contraction.

December’s incessant rainfall in Chennai impacted heavily on the sector, with falling new work leading companies to scale back output at the sharpest pace since February 2009. On the price front, inflation rates of both input costs and output charges were at seven- month highs.

"India’s manufacturing sector took a turn for the worse at the year end, with already-gloomy internal demand further hampered by floods in the South of country. Ending a 25-month sequence of growth, production plummeted in December. Such was the extent of the decline that the rate of reduction was the sharpest since the financial crisis," said Pollyanna De Lima, economist at Markit, which compiles the survey.

Consumer goods bucked the sub-sector trend and was the only category to see improving business conditions in December as production and new orders rose. Conversely, incoming new work and output fell in both the intermediate and investment goods market groups.

However, the survey noted that Indian goods producers hired additional workers in December.

"Anecdotal evidence highlighted expectations of an improvement in domestic demand in the near term. That said, the rate of job creation was little-changed from the marginal pace seen in the previous month," the survey said.