DELHI, India, Dec. 19, 2014 /PRNewswire/ -- Business sentiment at India's largest companies fell in December for the third consecutive month as orders growth fell to the lowest level for a year.
The MNI India Business Indicator, calculated from the responses of BSE listed companies, declined to 68.4 in December from 68.9 in November. Both manufacturing and service sector firms saw confidence ease.
Business confidence has risen sharply since April, just before Modi was elected Prime Minister, although latest data show a cooling in optimism. Sentiment fell slightly in the final quarter of 2014, to an average of 69.0 in October-December from 69.9 in July-September. This was, however, far above the outturn of 60.7 seen one year ago, highlighting the turnaround in corporate sentiment over the past year.
In line with the easing in overall business confidence this month, some of the key indicators within the report declined. Production eased to the lowest level since August while New Orders declined to the lowest level in a year following the conclusion of the major Indian festivals. In contrast with the MNI India BSI, orders are now just above the same level a year ago. Export Orders decreased for the fourth consecutive month due to the appreciation of the rupee.
More positively, the disinflationary trend seen since the start of the year continued in December with both price metrics from our survey declining further, showing that central bank measures appear to be keeping inflation capped. The indicator measuring prices charged to customers fell to the lowest level since June 2013 and companies also reported that their input costs fell to the lowest level since the survey started.
Commenting on the latest survey, Chief Economist of MNI Indicators Philip Uglow said, "The tapering in business sentiment over recent months casts some doubt over the sustainability of the recovery. Notably orders growth, a key measure of activity, has fallen and is barely above the level a year ago."
"Following the recent lower level of inflation and the further easing in price pressures evident in our survey, there is now clear scope for the Reserve Bank of India to reduce the benchmark interest rate. We expect to see an initial repo rate cut early in 2015, which will help to underpin growth over the coming year."
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Editorial Content:
Philip Uglow
Chief Economist, MNI Indicators
Notes to Editors
Please source all information to MNI Indicators.
MNI India Business Sentiment is a monthly poll of Indian business executives at companies listed on BSE (formerly known as the Bombay Stock Exchange). Companies are a mix of manufacturing, service, construction and agricultural firms.
Respondents are asked their opinion on whether a particular business activity has increased, decreased or remained the same compared with the previous month as well as their expectations for three months ahead, e.g. is Production higher/same/lower compared with a month ago?
Diffusion indicators are then calculated by adding the percentage share of positive responses to half the percentage of those respondents reporting no change. An indicator reading above 50 shows expansion, below 50 indicates contraction and a result of 50 means no change.
Data is collected via telephone interviews. More than 400 companies are surveyed each month.
About MNI Indicators
MNI Indicators, part of Deutsche Borse Group, offers unique macro-economic data and insight to businesses and the investment community. We produce data and intelligence that is unbiased, pertinent and responsive. Our data moves markets.
For more information, visit our website at www.mni-indicators.com.
