After growing at robust rates for most of the ongoing financial year, growth in Indian manufacturing activity slowed in December, primarily as the rate of incoming new orders decreased.
The HSBC Purchasing Manager’s Index, a headline index designed to measure the overall health of the manufacturing sector, stood at 56.7 in December, lower than a reading of 58.4 in November. However, the sector continued to expand albeit at a slower pace, as a reading above 50 indicates expansion.
Even as new orders increased during the month, the volumes were weaker compared to the inflows in November. Growth in export orders also eased marginally at the end of 2010, after registering a record rise in the previous month. However, the growth remained strong and comfortably above the historical trend.
“Notwithstanding the deceleration from last month, these numbers are testament to the strong momentum in the manufacturing sector. Output continues to grow rapidly and order books are still getting thicker,” said Leif Eskesen, chief economist for India and Asean at HSBC.
A substantial rise in input prices continued to be a concern for manufacturers as input costs have increased every month since April 2009 with the latest rate of inflation being the strongest in eight months. Output prices also rose markedly during the month and at the fastest pace since May.
Output increased substantially in December, reflective of sustained growth in overall new orders.
