Latest PMI data pointed to a further marked improvement in manufacturing operating conditions in Japan. New orders increased at a rate that matched October’s one-year high. This supported further expansions in output, employment and buying activity. Meanwhile, input prices increased at a historically weak rate, while charges declined slightly.
The headline PMI posted at 52.6 in December, unchanged from November (the highest reading since March 2014), thereby indicating a sustained marked improvement in operating conditions at Japanese manufacturers. Moreover, the latest index contributed to the strongest quarterly average (52.5) since Q1 2014 (55.3).
Growth in new orders increased at the joint-fastest rate in 14 months in December. According to panellists, greater demand stemmed from new product launches and advertising campaigns. At the sector level, both consumer and investment goods producers indicated marked growth in new work intakes.
Supporting total new order growth was a rise in international demand, as new exports expanded for the third consecutive month. Stronger foreign demand was attributed by some firms to greater trade volumes with Taiwan and Southeastern Asian countries.
Production expanded at a rate unchanged from November’s 20-month record. Subsequently, the sharp increases in both output and new orders led to the hiring of extra staff in December. Moreover, the rate of job creation was sharper than the average seen over 2015, with all three monitored sub-sectors registering greater staff numbers. Firms also mentioned the hiring of extra labour for research and development.
Despite an increase in workforce numbers, volumes of unfinished work at Japanese manufacturers were accumulated in December. Goods producers mentioned difficulties with production capacity keeping up with stronger demand. That said, the rate of increase was only slight.
Meanwhile, buying activity increased at a solid rate. Companies linked higher purchases to new product developments encouraging greater demand. Finally, input prices increased at a weaker rate, with reports of lower oil and metal costs helping to ease cost pressures. As a result, manufacturers were able to reduce their selling prices, although at only a slight pace.