Tue, Jan 03, 2012 - Page 10 News List

Indian manufacturing activity jumps

HOLDING ITS OWN:The positive news from HSBC comes at a time when business confidence has waned following a government report on falling industrial output

AFP, Mumbai

Indian factory activity showed its sharpest rise in six months last month, helped by improved demand and growth in new orders for business, according to a survey published on yesterday.

The HSBC India Manufacturing Purchasing Managers’ Index (PMI) rose to 54.2 last month from 51 in November — the strongest improvement since June last year — reflecting an improvement in client demand.

A figure above 50 indicates growth while a figure below indicates contraction.

“Activity in the manufacturing sector rebounded in December led by higher demand from both domestic and foreign clients,” HSBC economist Leif Eskesen said.

“This suggests that the momentum in the sector is not quite as weak as official and more dated industrial production data would suggest,” he added in a statement.

Employment in the manufacturing sector also rose last month, ending a period of job losses which started in August, the HSBC statement said.

Last month the government said that industrial output shrank 5.1 percent year-on-year in October, which was well below expectations and added pressure on the Reserve Bank of India to halt its aggressive cycle of interest rate hikes.

The survey finding — based on data from more than 500 manufacturers — comes at a time of weak business confidence in India.

The index is still below its long-term average of 56.

The central bank has increased rates 13 times since March 2010, but last month paused and even raised the possibility of future cuts, as a result of the economic slowdown, a weakening rupee and high inflation.

Eskesen said it would be “premature” for India’s central bank to begin targeting higher growth instead of lower inflation because input costs such as raw materials and fuel continue to climb.

Meanwhile, India’s biggest automaker, Maruti Suzuki, yesterday said that its monthly sales fell 7.1 percent last month year-on-year, as demand for cars weakened because of rising fuel costs and high interest rates.

The company, which is majority-owned by Japan’s Suzuki Motor Corp, said it sold a total of 92,161 vehicles last month, down from 99,225 in the same period in 2010.

The figure represents the seventh straight year-on-year monthly fall in car sales for Maruti, which has been dogged by a series of crippling labor disputes at one of its plants in the Indian state of Haryana State.

In October, Maruti’s sales slumped more than half from their level the previous year — its worst monthly figures in a decade.

Car sales have also been slowing in India as a result of high borrowing costs.

Prices have risen on the back of steeper commodity prices and the central bank’s interest rate rises to tame near double-digit inflation, analysts said.

However, car sales are expected to improve in coming months, with the banking holding rates and inflation showing early signs of moderating.

“The micro factors are improving ... interest rates are on hold, production constraints [for Maruti] are over and the industry has a strong backlog of orders to complete,” auto analyst Mahantesh Sabarad from Fortune Equity Brokers said. “This could mean improved sales data going ahead.”

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