India’s manufacturing sector growth expanded to a six month high of 54.7 in December as measured by the HSBC Purchasing Manager’s Index (PMI).

This compares with growth of 53.7 in November. A figure above 50 indicates expansion.

“Activity in the manufacturing sector picked up again led by faster output growth and a further uptick in new orders, which led to a faster increase in backlogs of work as companies struggled to keep up with demand. Moreover, final goods inventories’ depletion continued, which suggests that output growth is likely to hold up in coming months,” Leif Eskesen, Chief Economist for India & ASEAN at HSBC said.

The report compiled by financial information services company, Markit, on behalf of HSBC said that output at manufacturing companies in India rose during December, amid reports of higher order book volumes.

“The volume of incoming new work at manufacturers in India increased in December. New export orders also expanded, and at a solid pace. Anecdotal evidence suggested that total new work rose in line with the launch of new products and strengthening demand,” the report said.

However, there was only a slight improvement in employment in the manufacturing segment in December. About 5 per cent of monitored companies reported increased staffing levels, while majority (91 per cent) indicated no change as labour shortages and demand for higher wages weighed on employment.

In December, which also saw one of the fastest accumulations of backlog or unfinished work, input prices rose in line with rising raw material prices, rupee depreciation and strong demand.

satyanarayan.iyer@thehindu.co.in

(This article was published on January 2, 2013)
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