Operating conditions in the Japanese manufacturing sector were broadly stable in February, having improved at a solid rate at the start of 2016. Production growth slowed to the weakest in the current ten-month sequence of expansion, led by a drop in total new orders. Consequently, buying activity increased at a softer
rate. Meanwhile, both input prices and output charges declined.
The headline PMI posted at 50.1 in February, down from 52.3 in January, thereby pointing to a near stabilisation in operating conditions at Japanese manufacturers. Moreover, the latest figure was the lowest in eight months and below the long-run series average.
Production at Japanese manufacturers increased at a marginal rate in February and one that was slower than the historical average. According to panellists, a fall in demand weighed on output growth. At the sector level, both consumer and intermediate goods producers indicated softer rates of expansion in production, while investment goods producers noted a decline.
Contributing to an easing in production growth was a contraction in total new orders for the first time in eight months. Surveyed companies suggested challenging market conditions had led to a fall in new work intakes. However, the rate of decrease was only marginal overall.
The latest survey data also pointed to a decline in international demand as new export orders contracted for the first time in five months in February. A number of the survey panel commented on global economic instability, while some mentioned reduced trade volumes with China.
Subsequently, the rate of job hiring slowed to the weakest in the current five-month period of expansion. Buying activity growth was also cut back from January’s 23-month peak to only a marginal pace.
Resulting from growth in production and a decline in new orders, pressure on capacity was reduced and backlogs of work were depleted. Moreover, the rate of decline was the sharpest since last September.
On the price front, reports of lower raw material costs, particularly oil- and metal-related items, led to a fall in cost burdens. Concurrently, firms were able to reduce their charges passed on to their clients.