India: Indian goods producers ended 2014 in a higher gear, with business conditions improving at the quickest pace in two years in December. Accelerated growth of the manufacturing sector was reflected by faster expansions in output, new business and foreign orders.

Latest data also painted a brighter picture in terms of prices, as inflationary pressures eased during the month. Adjusted for seasonal factors, the HSBC India Purchasing Managers’ Index (PMI) climbed to a two-year high of 54.5 in December, up from 53.3 in the prior month.

Business conditions improved at a faster pace in all three market groups during the month, with the sharpest expansion seen in consumer goods.

Output in the Indian manufacturing sector rose in line with the headline index in December, with growth picking up to the quickest in two years. According to a number of survey participants, the latest rise in production was supported by stronger order books.

In this time, Indian manufacturing companies registered a further rise in new export business in December. New work from abroad expanded at the quickest pace since April 2011. Reflective of further growth of output and new orders, input buying among Indian goods producers increased in December. The rate of expansion accelerated to the most marked in the current 14-month sequence of growth. Subsequently, the pace of pre-production inventory building picked up to the sharpest in more than two years. Furthermore, stocks of finished goods held by Indian manufacturers rose at the fastest rate since the survey began in April 2005.

Finally, higher prices paid for metals, chemicals and electronics placed upward pressure on input prices in December. That said, the rate of cost inflation eased to the slowest in more than five-and-a-half years and was well below the long-run series average. Weaker cost pressures were mirrored by a relatively subdued rise in selling prices during the month.