India’s economy looked ready to leave a sharp downturn behind in the new year, as business and consumer activity showed more signs of gathering momentum in January. Two of the eight high-frequency indicators tracked by Bloomberg News improved last month, while five held steady and one deteriorated. That, for now, kept the needle on a dial measuring overall economic activity unchanged at 5 a number arrived at by using the three-month weighted average to smooth out volatility in the single-month scores.
The January reading points to a solid start for the new quarter, building on nascent gains seen in the October-December period. Official data on Friday is likely to show that India exited a recession in the final three months of 2020, with economists in a Bloomberg survey forecasting a gross domestic product expansion of 0.5% from a year ago.
Activity in India’s dominant services sector expanded for a fourth straight month in January, with the pace of new work and business activity both quickening from a month ago. The Markit India Services Purchasing Managers’ Index came in at 52.8 from 52.3 a month earlier. A reading above 50 indicates expansion.
Manufacturing activity also continued to strengthen, with companies ramping up production at the quickest pace in three months, thanks to higher sales and new export orders. Worryingly though, both input and output price pressures gathered steam and which will likely prevent headline inflation from easing sharply in coming months.