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Factory output up, exports sluggish

Hopes of an industrial rebound have sprung anew with signs of a sharp rise in factory activity in December driven by domestic sales, although exports growth fell to a nearly two-year low.

business Updated: Jan 02, 2012 21:30 IST
HT Correspondent

Hopes of an industrial rebound have sprung anew with signs of a sharp rise in factory activity in December driven by domestic sales, although exports growth fell to a nearly two-year low as orders dried out from crisis-hit European economies, India’s largest market for merchandise shipments.

The HSBC India Manufacturing Purchasing Managers' Index (PMI) rose to 54.2 last month from 51.0 in November — the strongest improvement since June — mirroring a rise in demand.

PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 500 manufacturing companies. A figure above 50 indicates growth while a figure below indicates contraction.

The latest PMI data comes barely a fortnight after government data showed that factory output had contracted by 5.1% in October triggering fears of a prolonged industrial slowdown.

“Activity in the manufacturing sector rebounded in December led by higher demand from clients, suggesting that the momentum in the sector is not quite as weak as official and more dated industrial production data would suggest,” said Leif Eskesen, chief economist for India and ASEAN at HSBC.

At $22.3 billion in November, exports, however, remain a concern as shipments grew by a sluggish 3.9% in November, down from 10.8% in October.

But imports jumped by 24.6% to $35.9 billion, resulting in the monthly trade deficit of $13.6 billion, according to government data released on Monday.