India’s economy seems to be shaking off slump

Bloomberg

India’s economy appears to be shaking off a slump, as activity in the services and manufacturing sectors expanded for a second straight month in December.
The needle on a gauge measuring so-called animal spirits signalled the economy may be taking a turn for the better, as five of the eight high-frequency indicators tracked by Bloomberg News came in stronger last month. The dial was last at the current position in August.
“Animal spirits” is a term coined by British economist John Maynard Keynes to refer to investors’ confidence in taking action, and the gauge uses the three-month weighted average to smooth out volatility in the single-month numbers.
The nascent recovery would need a helping hand, with expectations building that Finance Minister Nirmala Sitharaman will provide some stimulus when she presents the budget February 1. Official forecasts show the economy is set to expand at 5% in the year ending March 2020 — the weakest pace in more than a decade.
Here are the details of the dashboard:

Business Activity
The dominant services index rose to the highest level in five months in December as improving new work orders helped boost activity. The seasonally adjusted Markit India Services PMI index climbed to 53.3 from 52.7 in November, helping post a strong end to the calendar year.
India’s manufacturing PMI also rose — to 52.7 from 51.2 a month ago — boosted by the fastest increase in new orders since July. A reading above 50 means expansion while anything below that signals contraction.
The uptick in business confidence was accompanied by a rise in inflationary pressures, the survey showed. That trend may keep monetary policy makers from resuming interest-rate cuts anytime soon, leaving most of the heavy-lifting to boost growth with the government.
“The relative stability in macro indicators over the past two months suggests that the worst is behind, but the recovery is likely to be prolonged,” said Teresa John, an economist at Nirmal Bang Equities Pvt in Mumbai.
“Still, sluggish growth and rising inflation indicate that India may well remain in stagflation for most of 2020.”

Exports
Exports remained a laggard, falling 1.8% in December from a year ago. The drag was mainly because of a fall in export of engineering goods, which constitute a third of India’s non-oil exports.
Capital goods imports continued to contract and was lower by 16.5% year-on-year in December after a 22% drop in November. This was the seventh consecutive month of continuous decline, underscoring the weakness in the capex cycle, according to IDFC First Bank.
Weakness in demand for passenger vehicles persisted, with local sales falling 1.2% in December from a year ago, according to the Society of Indian Automobile Manufacturers.