Latest data signalled worsening operating conditions in the Japanese manufacturing sector. Production contracted for the first time since July 2014, underpinned by a further decline in new orders. Meanwhile, growth in new export orders slowed to the weakest in the current 10-month sequence of expansion. On the price front, input price inflation eased to the slowest in over two years.
At 49.9 in April, the headline PMI signalled a fractional deterioration in operating conditions in the Japanese manufacturing sector for the first time in almost a year. Furthermore, the headline PMI has only posted below the 50.0 no-change mark three times in the past two years. Reflecting an overall downturn in the manufacturing sector, production decreased for the first time since July 2014. According to anecdotal evidence, this was underpinned by a further decline in total new work.
New orders at Japanese goods producers decreased for the second successive month in April. Moreover, the rate of decline was the fastest since when the higher sales tax was implemented in April last year. Several companies commented on challenging market conditions and reduced demand from both domestic and international clients leading to the latest decrease. All three sectors registered falls in sales volumes, with intermediate goods producers noting a slightly quicker decline.
Despite reports of a weakening yen against the dollar, new export orders growth slowed to the weakest in the current 10-month period of expansion. This was reflected in the sector data as all three surveyed sectors signalled weaker international demand.
Contrasting with contractions in production and new orders, manufacturers hired additional staff in April. However, the rate of growth was weak and below the average over the past 12 months. Meanwhile, volumes of unfinished work declined for the second straight month. Moreover, the rate of depletion was the fastest since November 2014.
On the price front, purchasing prices continued to rise, although at the weakest rate since February 2013. Where prices rose, firms frequently mentioned the depreciation of the yen driving up imported raw material costs. Meanwhile, charges declined for the third month in a row, but only at a slight pace.