India's December manufacturing PMI sees fastest growth in five years

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Any reading above 50 indicates expansion in the sector.

The manufacturing sector grew in December, setting a new record as business conditions improved at a record pace, a new survey showed.

The seasonally adjusted Nikkei India Manufacturing Purchasing Managers Index rose to 54.7 in December from November's 52.6.

However, despite the additional resources, manufacturers' backlogs of work increased for an eighth successive month in December.

However, there was a note of caution in the data as growth in new export orders fell to 56.9 in December from a near three-year high of 60.0 a month earlier.

Manufacturing activity has remained above the 50 mark separating growth from contraction since June 2013 when Ireland was approaching the end of a three-year global bailout programme. The pace of job creation was the strongest since September. Although the rate of inflation quickened to a 10-month high, it was modest and weaker than the long-run series average.

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Production growth improved to a three-month high on better sales and stronger underlying demand.

Costs of raw materials such as oil and steel rose while prices of materials from Chinese suppliers increased, leading to a sharp rise in input costs in December.

Moreover, as consumer spending recuperated, firms were restricted in their ability to pass on higher cost burdens to clients which further placed upward pressure on firms' margins. "Anecdotal evidence pointed to stronger market demand from home and worldwide markets", Dodhia added.

"Challenges remain as the economy adjusts to recent shocks, but the overall upturn was robust compared to the trend observed for the survey history".

"Given the strong conditions evident in the manufacturing sector, it is no surprise to see that firms are upbeat about the outlook", Philip O'Sullivan, economist with Investec, said.