The manufacturing sector is back into expansion mode in January on the back of new orders from domestic and overseas clients, a private business survey showed on Monday.
The Nikkei India Manufacturing PMI — a composite monthly indicator of manufacturing performance — posted a reading of 51.1 in January, up from 49.1 in December, a month that saw a contraction due to flooding in Tamil Nadu.
Pollyanna De Lima, economist at Markit and author of the report, said the opening month of 2016 saw a rebound in new business — from both domestic and external clients — leading manufacturers to scale up output. “Whereas the trends in the growth rates are relatively weak in comparison with the long-run series averages, January’s PMI data paint a brighter picture of the economy,” she said.
Although the rate of expansion was modest, it was the sharpest in four months, the survey, conducted by financial information services provider Markit, said.
The consumer goods sub-sector remained the principal growth engine, seeing substantial expansion in both output and new orders. In contrast, the producers of investment goods saw output and new orders fall, while production volume stagnated in the intermediate goods category.
The survey also revealed that January saw mild job creation in the manufacturing sector, with headcounts added across the consumer, intermediate and investment goods categories.
The trend in new export order inflows strengthened. The level of incoming new export business has now risen in each of the past 28 months.
‘No rate cut likely’
Although the RBI is likely to continue its monetary policy loosening cycle in 2016, February’s meeting will probably see the repo rate remain unchanged at 6.75 per cent, according to Pollyanna. This is because the central bank is expected to remain wary of inflationary pressures building up in the country.