India’s manufacturing PMI drops to 52.3 in November on demonetization

India’s manufacturing performance has been weighed on by rupee demonetization. The withdrawal of high-value banknotes in India has reportedly impacted the country’s manufacturing growth in November, with firms hinting at weaker rises in order books, purchasing levels and output. The headline seasonally adjusted Nikkei India Manufacturing PMI came in at 52.3 in November, down from October’s 22-month high of 54.4. The November reading pointed to a modest upturn overall, said Markit.

Weaker growth in new business inflows was one factor leading to the downward movement in the PMI. Order books were up at a moderate rate, the slowest pace since July. According to panellists, higher demand from domestic as well as external clients was recorded. However, this showed that growth was hampered by the money crisis. The rise in new export orders also lost some stem in the month. Growth in manufacturing production decelerated amidst reports of cash shortages. Weaker increases in output were recorded in each of the three monitored sectors, with consumer goods producers registering a severe deceleration in growth.

Even if companies continued to increase their quantities of purchases, the pace of growth slowed from October’s 14-month high. Respondents have listed money issues as the main reason for the weaker growth in input buying. Sector wise, the weakest performer on this front was consumer goods, noted Markit. Meanwhile, manufacturing employment was widely unchanged in November.

With regards to stock levels, there was divergence as falling inventories of finished goods contrasted with higher holdings of raw materials and semi-finished items. The decline in postproduction stocks was mainly connected by respondents to a slower growth of output, whereas the accumulation in stocks of purchases was linked with purchasing activity growth.