Japan manufacturing PMI improves 1.1 points to 53.5

The seasonally adjusted Nomura/JMMA Purchasing Managers’ Index rose from 52.4 to 53.5 in April, its highest level in four months and one indicative of a solid improvement in Japanese manufacturing sector operating conditions.

Behind the latest PMI reading, April’s survey pointed to faster rises in both output and new business. Employment returned to growth in April, while backlogs were accumulated for the first time since September last year. Meanwhile, slower lead times were signaled for the eighth month running.

Manufacturing output rose again in April, increasing at a solid rate that was slightly faster than in the previous month. Where a rise in production was signaled, growth was primarily attributed to further gains in new business, which rose for the 10th month running in April. The rate of expansion in new work was solid, and accelerated to the most marked in four months. Those respondents that reported an increase in new orders often linked this to rising market demand. Growth was also supported by a series-record increase in export sales, with China and other Asian markets cited as key sources of new export business. Furthermore, a faster rise in new work received from overseas relative to overall new business suggested that external demand was a key driver of sales growth.

April data signaled that backlogs of work in the Japanese manufacturing sector rose for the first time in seven months. According to survey respondents, growth of unfinished business mainly reflected further intakes of new business.

Staffing levels in the Japanese manufacturing sector rose in April, thereby ending a 20-month period of decline. Anecdotal evidence suggested that firms were encouraged to take on additional workers in line with increased production requirements.

Employment
Data signaled that average input costs faced by Japanese manufacturers rose for the fourth month running in April. The rate of inflation was substantial, having accelerated to the most marked since October 2008. Prices paid for copper, petroleum and steel were all reported to have risen on the month.

Output prices set by Japanese manufacturers fell again in April, extending the current period of decline to 17 months. However, the rate of price discounting was the second-slowest in that sequence. Survey responses suggested that output price deflation reflected strong competition and, in some cases, client requests for lower prices.

Purchasing activity rose in April, increasing at a marked rate that was the fastest in six months. Growth of input buying primarily reflected increased output requirements. Subsequently, average vendor performance deteriorated at the second-fastest rate since June 2006.

Commenting on the Nomura/JMMA Japan Manufacturing PMI data, Minoru Nogimori, economist of the Financial & Economic Research Centre at Nomura, said: “The Japan Manufacturing PMI rose 1.1 points to 53.5 in April. It remained above the dividing line of 50.0 for the 10th consecutive month, suggesting manufacturing operating conditions remain solid. The New Export Orders Index rose 2.5 points to 58.2 in April, the highest level since data were first compiled in October 2001. Moreover, the improvement in the index is larger than the 0.5 gain recorded in March, suggesting that exports could continue to grow at a fast pace in the coming months. We expect exports to remain firm, particularly those to Asia and emerging economies, supporting the Japanese manufacturing sector for a while.”