Private sector output falls for sixth month running in December
contraction. Moreover, this was the sixth consecutive monthly drop in output levels, which is the longest period of continuous reduction since the 2008-2009 global financial crisis.
Moreover, the index dropped from November's 48.5, indicating a slightly faster rate of contraction. Whereas manufacturing production expanded, services output fell.
Business conditions in the Indian private sector economy continued to deteriorate in December. At 48.1, the seasonally adjusted HSBC India Composite Output Index posted below the crucial 50.0 threshold for the sixth consecutive month. Moreover, the index dropped from November's 48.5, indicating a slightly faster rate of contraction. Whereas manufacturing production expanded, services output fell. Underpinning the latest fall in
services output was a solid decrease in incoming new work. New business contracted at the quickest pace since September, with panellists reporting an increasingly fragile economy and competitive pressures. There were a few mentions that the upcoming elections had also contributed to the latest drop in new orders. Across the private sector as a whole, new business decreased at a faster, but moderate pace. Four of the six broad areas of the service economy registered lower output volumes, while new business contracted in five categories. As with the trend for output, the sharpest decline in new orders was noted at Hotels & Restaurants. The Post & Telecommunication sub-sector remained resilient, with growth of both business activity and new orders recorded.
Outstanding business at both service providers and manufacturers increased in December, leading to a further accumulation of unfinished work in the Indian private sector. Although modest, the overall rate of increase was above the long-run survey average.
December data indicated that private sector employment rose. The latest increase in payroll numbers was broad-based with both manufacturers and service providers posting job creation.
Average purchase costs at services companies rose further in December, amid reports of higher prices paid for fuel, food, transportation and electricity. That said, the rate of cost inflation was only moderate and the weakest since July. Input price inflation in the private sector as a whole eased to a six-month low. Additional cost burdens were passed on, as prices charged by private sector firms were raised for the fifty-fifth consecutive month in December. The latest increase in tariffs was, however, marginal and below its average.
Indian service providers remained upbeat about the prospects for business activity in 2014. Furthermore, the degree of confidence was the strongest in five months. Positive sentiment was linked by companies to forecasts of better economic conditions and hopes of higher demand. Some firms also mentioned that output is anticipated to grow after the elections.
