“We expect to see an initial repo rate cut early in 2015, which will help to underpin growth over the coming year”, says Chief Economist of MNI Indicators Philip Uglow. The market confidence continue to slide for the third month continuously.
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.”