Business conditions in Japan improve at slower pace
Staff Writer |
Survey data indicated softer growth momentum in the Japanese manufacturing sector during May, reversing the acceleration recorded in April.
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Although both output and new orders continued to rise, the rates of expansion weakened.
In turn, backlogs of work were accumulated at a slower pace, prompting a moderation in the rate of job creation.
Meanwhile, material shortages led to both longer supplier delivery times and greater input prices.
Firms responded by modestly raising selling prices.
The headline Nikkei Japan Manufacturing Purchasing Managers’ IndexTM (PMI) – a composite single-figure indicator of manufacturing performance – fell to 52.8 in May, from 53.8 in April, signalling a slower rate of improvement in the Japanese goods producing sector.
Furthermore, the index pointed to the joint-weakest expansion in nine months, on a par with October 2017.
However, the latest index reading was in line with the average observed across the current 21-month upswing.
Japanese manufacturers pointed to improving demand conditions during May, with new sales to both domestic and overseas clients rising.
Although total new order growth eased on the previous month, a stronger increase in new export orders was recorded.
China, Taiwan, Europe and North America were cited as sources of international custom.
That said, the upturn in foreign demand was markedly weaker than the expansions seen at the beginning of the year.
Nonetheless, a twentieth successive month of increasing new business inflows prompted firms to boost production line activity in May.
Output growth was solid, albeit weaker than the three-month high seen in April.
A rise in outstanding business was recorded in May, signalling that greater influxes of new orders had exerted pressure on production capacities.
To accommodate for higher workloads, Japanese goods producers raised employment.
However, in line with softer new order growth, rates of expansion in backlogs and employment both eased from April.
Supply chain pressures were also evident, with average lead times for the delivery of inputs lengthening to the most marked extent in seven years.
Panellists attributed this to material shortages and strong input demand.
Anecdotal evidence also suggested that operating costs were partly affected by shortfalls in supply.
The rate of input price inflation remained sharp and accelerated to the joint-fastest in 41 months.
Consequently, higher raw material costs motivated firms to hike selling charges.
Output prices have now risen for 17 successive months, the longest period of charge inflation since the survey began in 2001.
Overall, businesses retained an optimistic outlook towards output over the forthcoming 12 months.
In fact, the degree of confidence strengthened to a four-month high.
Panellists indicated that planned capital investments and the expected launch of new products supported positive sentiment. ■