Categories: Macroscope

Macroscope – Purchasing Managers’ Index (PMI), December 2020

What is the latest Manufacturing PMI reading?

India Manufacturing PMI recovers from 3-month low in November of 56.3 to record 56.4 in December. In October, it recorded the highest figures in 12 years at 58.9. The PMI reading has maintained growth trajectory for 5th month in a row. 

A reading above 50 denotes expansion and below 50 denotes contraction.

The Indian manufacturing sector continues to remain on the right path to recovery aided by recovering domestic demand. A worrying development remains higher input prices, which may add to output prices, especially as demand conditions normalize.

Business closures in 2020 saw manufacturers pump up production, and purchased input stocks at quickest rates seen in nearly a decade. Increased New orders led to decline in inventories.

Loosening of covid restrictions was reflected in improving market conditions and factory orders as expansion rates remained healthy despite component figures easing to 4- month low. Employment continues to be dark horse as jobs saw shedding in December.

Strong internal climate and weak external climate has fostered new-found foreign attention in India. This spilled over into increased export order book, albeit, at slowest pace in last 4 months, courtesy of cross-water lockdowns.

Increase in new orders resulted in higher raw material purchases, relaying growing momentum for 5 months in succession. Purchases grew at quickest pace since March’11.

Strong sales, courtesy of growing demand led to decline in finished stocks. The rate of depletion was steeper and faster than any seen prior to April.

As mentioned above, payroll saw cuts in body and bank count, stretching shedding sequence into its 9th month. Much of it is credited to guidelines issued by the government. The progressive unlockings of the economy will help these figures see positive territory too.

Input prices continued to increase in December, with inflation accelerating to a 26-month high and outpacing its long-term average. Selling prices followed suit, rising by par-plus rate. However, rate of increase continues to be below historical averages.

Looking ahead, manufacturing firms are foresee growth business activity in for next 36 months.

As is seen globally, manufacturing PMI continues to out-perform its services counterpart, courtesy of the latter being hit harder by Covid-19.

The latest PMI results for the Indian manufacturing sector continued to point to an economy on the mend, as a supportive demand environment and firms’ efforts to rebuild safety stocks underpinned another sharp rise in production.

On combining the latest 3 months data, performance of manufacturing industry for Q3FY21 is notably better than in Q2FY21. The 3-month PMI average rose from 51.6 to 57.2

The key risks will continue to be unforeseen events resulting from the virus, and current steep rates of inflation.

Click here If you want to read the complete Manufacturing PMI HIS Markit press release

Tejesh Kumar

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Tejesh Kumar

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