Chennai floods hit output

New Delhi: India’s manufacturing activity contracted in December for the first time in more than two years on back of floods in Chennai and fall in new orders. Nikkei’s Manufacturing Purchasing Managers’ Index, compiled by Markit, fell to a 28-month low of 49.1 in December from November’s 50.3. PMI posted below the level of 50 for the first time since October 2013. Any number below 50 means contraction.

“Indian manufacturers saw business conditions deteriorate at the end of 2015. Incessant rainfall in December in Chennai impa-cted heavily on the sector, with falling new work forcing companies to scale back output at the sharpest pace since February 2009,” said Markit.

However, 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. “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,” said Markit.

It said that around 18 per cent 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.

On positive side, participants also said that weaker rupee led to improved pricing power in external markets. “Indian goods producers hired additional workers in December. Anecdotal evidence highlighted expectations of an improvement in domestic demand in the near term,” said the survey.

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