Latest data signalled an improvement in operating conditions in the Japanese manufacturing sector. Growth in both production and new orders resumed, having fallen in the previous survey period. Concurrently, employment growth was sustained for the second straight month, while buying activity increased for the first time in three months. Meanwhile, input prices rose at the weakest rate in the current 29-month sequence of inflation.
At 50.9 in May, up from 49.9 in April, the headline PMI signalled a return to positive improvements in operating conditions at Japanese manufacturers. Although modest overall, the latest expansion was in line with the average seen this year so far. Reflective of an overall improvement in operating conditions was a return to production growth.
According to survey participants, the latest expansion was supported by an increase in client demand and greater productivity. Both consumer and investment goods producers signalled expansions in output, with the former registering the faster rate.
A rise in production was matched by an increase in new orders at Japanese goods producers. The rate of expansion was marginal but nevertheless above the long-run series average. Several panellists mentioned enhanced advertising and new product launches as the main drivers behind greater new work intakes.
Concurrently, new orders from abroad remained in growth territory for the eleventh successive month. That said, the rate of expansion was fractional, with the vast majority of monitored firms noting no change in comparison to the prior month. As a result of a return to both production and new orders growth, manufacturers’ hired additional staff in May. Although marginal, the rate of expansion was above the average over the past year. Both consumer and investment goods producers
registered growth in employment. Meanwhile, volumes of unfinished work were depleted for the third straight month, albeit at a weak rate.
On the price front, input costs continued to increase, although at the weakest rate in the current 29-month sequence of inflation. Where purchasing prices rose, firms mentioned the depreciation of the yen driving up imported raw material prices. Subsequently, charges increased, albeit at a weak rate.