In response to greater inflows of new orders, good producers were encouraged in December to engage in input buying at the sharpest rate since August 2015. As a consequence, the sector observed a modest increase in pre-production inventories for the first-time since June.
Meanwhile, the introduction of the Goods and Services Tax (GST) continued to exert upward pressure on manufacturers' cost burdens in December. Furthermore, input cost inflation accelerated to the strongest since April and was sharp overall. Reflecting greater cost pressures, firms raised their output charges for the fifth month in succession. Although the rate of inflation quickened to a 10-month high, it was modest and weaker than the longrun series average.
Finally, the Future Output Index signalled the strongest level of confidence in three months, with more than one-in-five survey participants forecasting higher production. Expectations of an improvement in economic conditions was cited as the key factor behind positive sentiment. That said, the level of business confidence remained below the trend observed for the survey history.
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Source: Nikkei India Manufacturing PMI®, IHS Markit.
