India’s manufacturing activity lost some momentum in December easing to a three month low after hitting a 10 month high in November, amid fears that the rapidly spreading third wave of the Coronavirus (Covid-19) pandemic may hit consumer sentiment and output.

       Data released by the analytics firm IHS Markit showed that the Purchasing Managers’ Index (PMI) for manufacturing fell to 55.5 in December from 57.6 in November. A reading above 50 indicates expansion in economic activity and a number below that signals contraction.

       “Companies continued with their stock-building initiatives, as evidenced by another robust upturn in buying levels. Business confidence strengthened, but sentiment was again dampened by concerns surrounding supply-chain disruptions, Covid-19 and inflationary pressures,” the data analytics firm said.

       Although input costs rose sharply, and at an above-trend pace, the rate of inflation eased to a three-month low. Companies in turn restricted the passing on of additional cost burdens to clients, with factory gate charges increasing at the slowest pace in over a year.

       Amid reports of strong demand conditions, fruitful marketing and new client wins, manufacturers observed a further increase in new orders during December. “The upturn was sharp, despite being the slowest since September. Similarly, production rose at a sharp pace that was nevertheless the weakest in three months,” IHS Markit said.

       Pollyanna De Lima, Economics Associate Director at IHS Markit said manufacturers were optimistic that output would continue to increase in 2022, but business sentiment was somewhat tamed by worries surrounding the path of the pandemic, inflationary pressures and lingering supply chain disruptions. “There were tentative signs that inflationary pressures started to subside, but companies weren't particularly confident that such trend would continue. Despite easing in December, input cost inflation was still running at one of its highest rates in around seven-and-a-half years. The vast majority of firms nevertheless decided to keep their selling prices unchanged, in order to boost sales, with overall charges up only marginally in December," she added.