Indian manufacturers saw business conditions deteriorate at the end of 2015. December's incessant rainfall in Chennai impacted heavily on the sector, with falling new work leading companies to scale back output at the sharpest pace since February 2009. On the price front, inflation rates of both input costs and output charges were at seven-month highs.
Dipping from 50.3 in November to 49.1 in December, the seasonally adjusted Nikkei India Manufacturing Purchasing Managers' IndexTM (PMI)TM - a composite single-figure indicator of manufacturing performance - pointed to a deterioration in operating conditions across the sector, with the PMI posting below the no-change level of 50.0 for the first time since October 2013.
Consumer goods bucked the sub-sector trend and was the only category to see improving business conditions in December as production and new orders rose. Conversely, incoming new work and output fell in both the intermediate and investment goods market groups. Having risen for 25 straight months, total manufacturing production in India fell during December. Furthermore, the rate of contraction was the sharpest in almost seven years. Panellists linked the decline in output to falling new orders and the Chennai floods.
Ending a 25-month sequence of growth, incoming new work decreased in December. Around 18% of panellists reported lower levels of new orders, which they commonly linked to heavy rains weighing on domestic demand. In fact, new business from abroad increased in December. Despite being modest, the rate of expansion was the quickest since August. According to survey participants, the weaker rupee led to improved pricing power in external markets.
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