 |
| Source: Markit Economics |
The seasonally adjusted Nomura/JMMA Japanese Manufacturing PMI (Purchasing Managers' Index) remained deeply entrenched in negative territory in March, posting 33.8. Below 50 signals a contraction. Despite rising for the second straight month, the headline index signalled the fourth-sharpest deterioration in operating conditions recorded by the series to date.
Latest data indicated that manufacturing output declined further in March. Despite remaining severe, the rate of contraction eased to its weakest since last November. Reports from the survey panel suggested that sharp falls in new business had contributed to the latest downturn in production. Particular weakness in output persisted in the Basic Metals sector.
Levels of new business continued to drop at a rapid pace in March. However, the latest decline was the least marked for four months. Panellists signalled that domestic demand had deteriorated as clients postponed investment expenditure given the bleak economic outlook. Data also pointed to a sharp drop in new work received from abroad. Anecdotal evidence suggested that demand continued to weaken in key export markets amid unfavourable business conditions.
Average cost burdens declined at the fastest rate in just over seven years in March. Survey responses frequently linked the latest drop to lower prices for a wide range of raw materials amid low demand in global markets. March marked the fourth month running in which input prices have decreased.
Japanese manufacturers lowered their output charges for the fourth successive month in March. Although the rate of decline remained sharp, it was the weakest for three months. Panellists cited increased competition as a key factor prompting further price cuts. There were also reports that depressed commodity prices had contributed to the latest drop in charges.
Japanese manufacturers continued to make significant inroads into their backlogs of work in March. The rate of backlog clearance remained sharp, despite easing markedly from February’s record. Steep reductions in new work were cited as a key factor contributing to the latest fall in backlogs.
Reflecting a highly pessimistic outlook for demand, companies continued to reduce their workforce numbers in March. Steep falls in new business also underpinned the sharp rate of job shedding. It was the eighth successive month in which staffing levels have fallen.
In line with considerable falls in new business, Japanese manufacturers reduced their buying activity at a rapid pace in March. Moreover, lower purchasing enabled vendors to improve their delivery performance at the third-fastest pace since the inception of the series in October 2001.
Commenting on the Nomura/JMMA Japan Manufacturing PMI data, Minoru Nogimori, Economist of Financial & Economic Research Centre at Nomura, said: “The PMI rose 2.2 points to 33.8 in March, from 31.6 in February. It still remained significantly below the critical no-change mark of 50.0, showing the manufacturing sector to be in a deep recession.
However, the New Orders Index rose for the third consecutive month, while the New Export Orders Index increased for the second month running. Moreover, the pace of decline in production activity eased further over the month.”
The Nomura/JMMA Japan Manufacturing PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 industrial companies. The panel is stratified by Standard Industrial Classification (SIC) group, based on the industry contribution to GDP.
