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Month: June 2015

CHINA MANUFACTURING PMI REMAINS WEAK

Operating conditions in China’s manufacturing sector continued to deteriorate in May, as companies signalled a renewed contraction of output as total new business fell for the third month running. Data suggested that weaker demand overseas was a key factor behind the latest fall in new business, as new export work declined at the steepest rate since June 2013. Meanwhile, deflationary pressures in the sector eased, with both input and output prices recording the slowest rates of deflation since August 2014.

Adjusted for seasonal factors, the HSBC Purchasing Managers’ Index™ (PMI™) posted at 49.2 in May. Although this was up slightly from 48.9 in April, the index remained below the crucial 50.0 neutral mark and signalled a third successive monthly deterioration in the health of China’s manufacturing sector. However, the rate of deterioration remained only slight.

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May data signalled a renewed fall in Chinese manufacturing output, after production volumes stagnated in April. Although the rate of decline was only marginal, it was the first time that output had contracted since last December. Anecdotal evidence suggested that a softening in market conditions had dampened client demand. Furthermore, total new business placed at Chinese manufacturers has now fallen for three successive months. Data suggested that weaker demand from abroad was the main factor behind the latest reduction in new work. Moreover, the latest fall in new export business was the sharpest in nearly two years.

Manufacturers tempered their production plans in line with fewer new orders in May, with purchasing activity falling for the second month in a row. Consequently,
stocks of purchases fell in May, though the rate of depletion was only slight.

Employment at Chinese goods producers declined again in May, extending the current sequence of job shedding to 19 months. According to anecdotal evidence, lower production requirements and the nonreplacement of voluntary leavers led to reduced staff numbers. Meanwhile, backlogs of work rose fractionally over the month, after a slight reduction during April.

Average input costs fell again in May, albeit at the weakest rate in nine months. Prices charged also fell in May but, in line with the trend for cost burdens, the rate of discounting eased to its slowest since August 2014.

JAPAN MANUFACTURING PMI UP 1.0 TO 50.9

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.

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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.

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