India?s manufacturing sector suffered its first contraction in the history of its survey during November, according to the latest data from ABN AMRO, with levels of production and incoming new orders both down sharply. A significant reversal in the strength of the domestic market was the principal factor underlying the weaker performance of manufacturing, as tighter credit conditions and the onset of the global economic downturn hit confidence and reduced clients? willingness to commit to new spending.
The headline ABN AMRO Purchasing Managers? Index (PMI) ? a seasonally adjusted index designed to gauge underlying sector conditions ? plunged to a record low of 45.8.
This is the first occasion in the history of the survey that the PMI has fallen below the neutral 50.0 mark.
November data was consistent with a broad slump of the manufacturing sector, with all except one of the indexes covered by the report falling to series record lows and posting levels well below peaks seen during mid-year (the exception being suppliers? delivery times). On the prices front, the latest data signalled that average input costs and output prices had fallen for the first time in their respective series histories in November.
The decline in both of these variables was mainly driven by the current weak market conditions and lower commodity prices. There were also some reports of firms lowering their average charges in response to increased competition. November data provided further evidence that capacity pressures were easing in the manufacturing sector.