A rebound in export demand and accelerated output growth helped India's manufacturing activity expand for the second consecutive month in February, after it contracted in December due to demonetisation.
The Nikkei India Manufacturing Purchasing Managers' Index (PMI) – compiled by Nikkei and research firm Markit – rose to 50.7 in February from 50.4 in January. A reading below 50 indicates a contraction and a reading above it indicates expansion.
The upturn in output reflected improved demand from both the domestic and external markets.Nikkei India Manufacturing PMI Report
Input costs rose at the quickest pace since August 2014 and output charge inflation climbed to a 40-month peak, the report said, adding that “Greater output needs encouraged some firms to step up buying levels, but production requirements were insufficient to generate job creation.”
With an increase in new orders and no new jobs being created, outstanding business rose during the month. “The rate of backlog accumulation was the fastest since last October,” said the report.
Subdued Sentiment
While the year-ahead outlook for output remained positive, the confidence among Indian manufacturers fell well below its five-year historical average.
...with growth rates well below-par, thesector still has many areas to develop before it canfire on all cylinders. Businesses don't yet seemconvinced as to the sustainability of the rebound ashighlighted by cuts to payroll numbers anddestocking initiatives. In fact, confidence towardsthe year-ahead outlook for production dipped sinceJanuary to the second-lowest since the end of 2015.Pollyanna De Lima, Economist, IHSMarkit
Look Out For Services PMI
With the manufacturing sector showing signs of growth with some red flags, all eyes will now be on the services PMI, which contracted for the third straight month in January. The Nikkei India Services PMI Index was at 48.7 last month.
Also Read: As GDP Growth Outstrips Forecasts, Economists Scramble To Explain
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