India's Manufacturing Sector Contracts In December

India’s manufacturing sector contracted for the first time in 2016 as the rupee demonetization took its toll on activity, survey data from IHS Markit showed Monday.

The headline Nikkei manufacturing Purchasing Managers’ Index declined to 49.6 from 52.3 in November. The score dropped below the crucial 50.0 threshold for the first time in 2016.

Nevertheless, the average over the December quarter of 52.1 was broadly in line with that seen in the July-September period, IHS Markit said.

Both output and new orders declined for first time in a year. In turn, quantities of purchases were scaled back and employment lowered.

Meanwhile, input costs increased at a quicker rate, whereas output charge inflation eased in December.

“Having held its ground in November following the unexpected withdrawal of 500 and 1,000 bank notes from circulation, India’s manufacturing industry slid into contraction at the end of 2016,” Pollyanna De Lima, an economist at IHS Markit and author of the report, said.

“With the window for exchanging notes having closed at the end of December, January data will be key in showing whether the sector will see a quick rebound,” the economist added.

The material has been provided by InstaForex Company – www.instaforex.com

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