RRecent macro-economic data including official Index of Eight Core Industries for November And S&P Global’s survey-based Purchasing Managers’ Index (PMI) For December, the manufacturing and services sectors provide mixed signals on the underlying momentum in the economy. Provisional government data showed output in core industries ranging from coal to electricity rose an average of 5.4% year-on-year in November. Double-digit expansion in cement, coal, power and steel lifted the index. However, on a sequential basis, contraction in six of the eight sectors, including the heavyweights of electricity and refinery products, which together represent nearly half the index, kept average core output unchanged. While electricity generation declined 2.1% from October, refinery products decreased 3.1% sequentially. Only coal and cement production expanded both year-on-year and month-on-month, indicating that non-electricity demand for coal and construction activity could start to gain some traction in the third fiscal quarter. Is. The uptrend in cement is encouraging as consumption of the key construction material extends to job-intensive housing and infrastructure sectors and, if sustained, could help cushion macroeconomic momentum. The 12.3% annual and 15.1% sequential expansion in coal production is also a positive omen as it indicates an improvement in fuel availability to fire captive power plants and furnaces in critical process and metallurgical industries.
Separately, more up-to-date December PMI data showed manufacturing momentum strengthened significantly as businesses posted the fastest increase in new orders since February 2021. A private survey of purchasing managers at nearly 400 manufacturers indicated that average production growth at these firms had been affected. Last month hit a 13-month high, with a PMI reading of 57.8, pointing to the strongest regional expansion since October 2020. Goods producers increased hiring to help meet a backlog of orders. And although jobs growth was the slowest since September, employment across sectors rose for the tenth month in a row, reflecting increased optimism among manufacturers. The PMI survey shows that overall output charge inflation in the private sector accelerated, with manufacturers reporting inflation in selling prices higher than gains in input costs for the first time in nearly two-and-a-half years. Policy makers cannot afford to let down their guard on inflation at this stage.