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The Nikkei Japan Manufacturing PMI® in May showed output was reduced for a fifth successive month as demand from both domestic and overseas markets fell. Cusiness outlook turned pessimistic for the first time in six-and-a-half years.

Japan Manufacturing

Nikkei Japan Manufacturing Purchasing Managers’ IndexTM (PMI)® For May 2019

Highlights

  • 49.8 in May, from 50.2 during April.
  • Little movement in main output and new order components
  • Fall inemployment sub-index was the main factor contributing to the month-on-month dip in the PMI.
  • Although job creation was sustained in May, with firms reporting graduate recruitment as a factor underpinning the rise in manufacturing employment, the rate of increase was only mild and the weakest in two-and-a-half years.
  • Softer rise in workforce numbers amid lower output requirements, with new order intakes dipping for the fifth straight month in May.
  • Makers of both capital and intermediate goods saw drops to sales
  • Consumer goods producers reported an expansion in demand.
  • Panellists indicated the downturn in new orders had been a reflection of weakness both domestically and overseas.
  • New export business fell for the sixth consecutive month in May, which firms attributed to challenging economic conditions
  • Increasing rate of contraction at key trading partners such as China, as well as greater competition internationally.
  • Stocks of both finished goods and inputs declined in May.

Japan manufacturing PMI May 2019

  • Post-production holdings were reduced at the fastest pace since January,
  • Input stocks were cut for the sixth time in seven months.
  • Despite lower quantity of purchases at Japanese manufacturers, supply chain pressures were maintained in May, with delivery times lengthening.
  • According to panellists, stock shortages at vendors drove the deterioration in supplier efficiency.
  • There were reports from some firms that suppliers had raised charges during May, contributing to another monthly increase in operating costs.
  • Although the rise was solid overall, it was little changed from April’s 20-month low
  • Having shown signs of a slight recovery in April, future output expectations turned pessimistic in May for the first time since November 2012, amid concern towards heightened trade tensions between the US and China, as well as the planned sales tax hike later this year.

Comment

Commenting on the Japanese Manufacturing PMI survey data, Joe Hayes, Economist at IHS Markit, which compiles the survey, said:

“There were no signs a let-up in the recent manufacturing downturn during May, as output and new orders both slipped for fifth successive months. Weak demand from Japan’s key trade partner, China, as well as signs of an increasingly sluggish domestic economy, have impacted sales volumes. Sub-sector data also indicated the area where manufacturing softness had hit hardest, with investment goods producers leading the decline in order books. Given the importance of capital goods to Japan’s foreign trade, it would suggest further difficulties lie ahead for Japanese exporters.

“With the upcoming sales tax hike and upper house elections in July, there lies ahead potential banana skins for Japanese firms to avoid. Re-escalated trade tensions between China and the US merely add to existing concerns for manufacturers. Subsequently, businesses cast a downbeat assessment for the year ahead for the first time in six-and-a-half years.” 

Source:Nikkei

From The TradersCommunity News Desk

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