India's manufacturing activity in December reaches a maximum of 7 months, but business optimism weakens

BENGALURU: India manufacturing activity It expanded at its fastest pace in seven months in December, as an increase in new orders led companies to increase production, a private business survey showed on Thursday.

However, business optimism fell to a minimum of almost three years, as companies worried about difficult market conditions.

The Nikkei manufacturing purchasing managers index, compiled by IHS Markit, rose to 52.7 in the last month of 2019 from November 51.2.

The reading was the highest since May. It also remained above the 50 mark that separates the growth of the contraction for 29 months, the longest since July 2013.

The increase in the growth of the Indian manufacturing sector marked by the latest PMI results will be well received by policy makers, especially given the worrying results observed in October, said Pollyanna De Lima, principal economist at IHS Markit.

Factories benefited from a surge in demand and responded by expanding production to a greater extent since May.

A sub-index that tracks overall demand in the sector reached a maximum of five months in December, which together with strong growth in production led companies to hire at the fastest pace since early 2019.

The solid growth in demand occurred despite the fact that production prices increased at the fastest rate in almost three years and the inflation of input costs reached a maximum of 13 months, which suggests a greater acceleration in inflation general.

The increase in price pressures forced the Reserve Bank of India to maintain stable interest rates in December after five cuts at the beginning of 2019 and could leave it with less space to facilitate policy in the coming months to support the economy.

The PMI survey also showed optimism about production in the next 12 months, which has declined to its lowest level since February 2017.

The degree of optimism indicated at the end of 2019 was the weakest in just under three years, reflecting concerns about market conditions, which could restrict job creation and investment in early 2020, de Lima added .