Latest data highlighted a weaker improvement of operating conditions in the Japanese manufacturing sector in March. Production growth slowed to the weakest since October 2014, alongside a fall in new orders. Subsequently, employment levels declined for the first time in six months in March. Meanwhile, cost pressures persisted, as input prices continued to rise, albeit at a slower rate.
The headline PMI posted at 50.3 in March, down from 51.6 in February, thereby signalling a weaker improvement in overall operating conditions in the Japanese manufacturing sector. Moreover, the latest reading was the lowest in the current ten month period of expansion.
Manufacturing production growth eased in March, having expanded in February at the quickest pace since before the higher sales tax was implemented in April 2014. That said, output increased at a faster rate than the long-run series average, with some panellists mentioning stronger demand from international clients.
PMI data suggested that the recent fall in total new orders was mainly caused by poor domestic market conditions, as new export orders remained in positive growth territory for the ninth successive survey period in March. Several companies mentioned a favourable yen/dollar rate helping to improve price competitiveness, while some firms commented on higher trade volumes with China, Korea, the US and Europe. (…)
As a consequence of the depreciation of the yen, cost pressures persisted in March, as companies reported steep hikes in imported raw material prices. However, input price inflation eased to the slowest rate since July 2013. Meanwhile, output charges declined for the second month running, but only at a slight pace. Where charges fell, panellists mentioned price negotiations with clients.