Latest survey data pointed to a sharp deterioration in manufacturing conditions. Production decreased at the quickest rate since April 2014, led by the fastest decline in new orders in over three years. As a result, firms cut back on their input buying at the most marked rate in two years. Employment, on the other hand, remained in growth territory for the seventh consecutive month. Meanwhile, input prices declined at the quickest rate since August 2012, enabling companies to lower their charges further.
The headline PMI posted 48.2 in April, down from 49.1 in March, thereby highlighting a sharper deterioration in operating conditions at Japanese manufacturers. Moreover, the latest reading was the lowest since January 2013. Contributing to the overall decline in operating was a fall in output. In fact, the rate of decrease was the fastest in two years. The recent earthquakes in one of Japan’s key manufacturing regions was cited by panellists as having a detrimental effect on production.
A contraction in output was matched by a marked decrease in new orders. Moreover, the rate of decline was the quickest since December 2012. Panellists attributed the fall in total new work intakes to a weaker Asian economy leading to a slump in foreign demand.
Subsequently, new export orders decreased at the sharpest rate since January 2013. Firms mentioned a reduction in trade volumes with Taiwan and China in particular. At the sector level, all three market groups registered marked falls in foreign demand, with investment goods producers noting the fastest decline.
As a result, manufacturers cut back on buying activity and made deliberate efforts to clear inventories of pre-production items. Meanwhile, employment increased for the seventh month running, with the rate of expansion the best recorded since January.
Reports of reduced raw material costs, particularly oil- and metal-related items led to further fall in input costs. In fact, the rate of decline was the sharpest in over three-and-a-half years. Consequently, manufacturers were able to reduce their charges for the fifth successive month.