Given the recent slide of commodity prices, Nomura said it expect input costs to fall next month, while output prices may remain largely unchanged as demand improves, leading to better corporate profit margins
Led by sharp rise in the output and new orders sub-indexes, the HSBC India's manufacturing Purchasing Managers Index (PMI) rose to a 21-month high of 53.3 in November from 51.6 in October. While the sharp rise in manufacturing activity is partly seasonal on a revival of economic activity after the October festive season, Nomura, in a research note said, it believes the rise in PMI nonetheless does indicate stronger underlying momentum.
"Today's PMI data indicate that demand – and thus manufacturing activity – has recovered in Q4, following the consolidation seen towards the end of Q3. Despite the increase in production during the month, the new orders-to-inventory ratio rose to 1.10 in November from 1.06 in October, suggesting strong momentum in manufacturing activity should continue into December as well. This in turn suggests manufacturing sector growth in Q4 following a dismal 0.1 % y-o-y in Q3," the report said.
Nomura said, "The rise in the price indexes does indicate that there could be some uptick in WPI inflation in November. However, given the recent slide of commodity prices, we expect to input costs to fall next month, while output prices may remain largely unchanged as demand improves, leading to better corporate profit margins. Overall, we remain confident that the economy is on a gradual recovery path and real GDP growth is likely to climb in coming quarters. Overall we expect real GDP growth of 5.5% in FY15 from 4.7% in FY14."
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