While Chennai floods had taken a toll on the manufacturing sector in December, the sector saw production as well as new orders – both domestic and export – surge in January, as per the monthly Purchasing Managers Index (PMI) survey conducted by Nikkei and Markit.
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The index, below the market forecast of 49.6, fell to its lowest level since August 2012, as China’s economy is seeking new growth engines amid a housing market slowdown and a campaign to cut industrial overcapacity.
Its reading contrasts with that of the PMI for the manufacturing sector alone, released a day earlier, which showed that factory activity in Singapore contracted for a seventh straight month.
The score is up slightly on the 52.1 recorded in December, and any figure above 50 on the 100-point scale indicates that the sector is expanding.
New business has increased in each month since July 2013, exports also increased despite increases in Sterling values.
In the beginning of 2016, consumer goods sub-sector remained the principal growth engine witnessing substantial expansions in new orders and output, while investment goods producers experienced decline in new orders and output.
“A key highlight of today’s report is the new orders component, which reveals a sharp and accelerated expansion, extending the current run of positive readings to 31 months”. Sectors reflected include manufacturing, services, construction, transportation and storage, and retail. “Economic weakness has always been a major concern for stock investors, so today’s PMI data is not unexpected”, said Zhou Lin, analyst at Huatai Securities.
Adjusted for seasonal factors, the Nikkei India Composite PMI Output Index climbed to an 11-month high of 53.3 in January from 51.6 in December.
Markit added that, though services employment growth was at a three-month high, the 12-month outlook was the weakest seen in three years.
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“The pressure on economic growth remains intense in light of continued global volatility”, said Fan, who called for policymakers in Beijing to continue rolling out finely tuned stimulus measures as needed to prevent growth from slowing too sharply.
