Japanese manufacturing PMI shows that firms saw an expansion in output for the thirteenth consecutive month in March. Similar trends were observed for new orders, employment and purchasing activity. Meanwhile, output prices decreased marginally whilst input prices continued to increase and suppliers’ delivery times lengthened to the greatest extent since December 2011. Meanwhile official data Monday showed Japan’s industrial production fell in February, as the first sales-tax increase since 1997, that is due to take effect on Tuesday, risks stalling recovery in the world’s third-biggest economy. Bloomberg reports Monday that a separate survey of manufacturers by the trade ministry pointed to a sluggish rebound following February’s decline. Companies plan to boost production by 0.9% in March and cut it by 0.6% in April, the trade ministry said.
The 3 percentage-point increase in the sales tax to 8% is forecast to cause the economy to shrink at an annualised 3.5% in the second quarter, before a rebounding to 2.1% in the following three months, according to a separate Bloomberg survey.
The headline seasonally adjusted Markit/JMMA PMI (purchasing managers' index) - - a composite indicator designed to provide a single-figure snapshot of the performance of the manufacturing economy - - posted at 53.9 in March, down from 55.5 in February. This was the thirteenth consecutive month of improvement, although business conditions strengthened at the slowest pace since September last year.
Output continued to expand, which companies attributed to a hike in demand before the increase in the sales tax. However, the expansion in output was slower than February and the weakest seen in six months. Panellists partly blamed the weakening of the expansion of output on factories being damaged by heavy snow.
Alongside the increase in output, new orders and new export orders rose. The level of new orders rose again in line with the trend since March 2013. Similar to the explanation mentioned for output, the growth in new orders was attributed to the rise in demand before the increase in sales tax. Export orders continued to grow with 22% of firms reporting higher new business from abroad. Firms commented that new orders from China and the Philippines contributed to the growth in exports.
Due to the rise in demand before the sales tax, Japanese manufacturing companies increased their stocks of finished goods. Firms experienced a second consecutive month of growth in the number of goods awaiting shipment, although the rate of accumulation in March was only marginal.
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