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| Source: Markit Economics |
Data from Nomura/JMMA showed further contraction of the Japanese manufacturing sector in April but. The seasonally adjusted headline Purchasing Managers’ Index (PMI) rose sharply to 41.4, from 33.8 in the previous month, to signal that operating conditions deteriorated at the least marked rate since last October.
The Bank of Japan said today the world’s second-largest economy will resume growing in 2010 after shrinking 3.1% in this fiscal year.
Gross domestic product (GDP) will rebound 1.2% in the year starting April 2010, compared with its January estimate of a 1.5%, the central bank said in its semiannual outlook today in Tokyo. The current fiscal year’s contraction will be steeper than the 2% forecast 3 months ago.
Production levels at Japanese manufacturers fell again in April, extending the current period of decline to fourteen successive months. Despite easing considerably from a month earlier, the rate of contraction was steep in the latest survey period.
Reduced volumes of new business were cited by panellists as the principal factor driving output lower in April, while there were also reports that economic uncertainties had prompted firms to curb production at their plants.
Reflecting a similar trend in output, latest figures showed that levels of new business placed at Japanese manufacturers fell further in April. It was the fourteenth successive monthly decline in order levels, with firms generally attributing the latest drop to poor demand. However, the rate of contraction eased sharply to its weakest since last August.
Prices charged by Japanese manufacturers fell at a marked pace in April. Competitive pressures were cited by several panellists as the key factor limiting pricing power in April. Output charges have now fallen in each of the past five months.
Japanese manufacturers recorded another month of falling input prices in April, largely reflecting their ability to negotiate further price reductions for their inputs at a time of instability on global commodity markets. It was the fifth successive month in which average cost burdens have declined, with the latest drop the sharpest in over seven years.
Despite easing sharply since March, the rate of backlog clearance was again considerable in April. Firms have now reduced their levels of work outstanding in each of the past fifteen months. According to panellists, the latest decline in volumes of outstanding business was largely due to spare capacity at their plants.
April marked the ninth month running in which firms have reduced their staffing levels. The latest drop in employment remained sharp, with the rate of job shedding accelerating to its third-fastest since the start of the series in October 2001. Of those firms that reported implementing job cuts during April, the majority attributed this to unfavourable market conditions and the non-replacement of temporary workers.
April data pointed to a further sharp reduction in buying activity, although the latest drop was the least marked since last October. Reduced demand for inputs enabled suppliers to improve their delivery performance for the sixth month running.
Commenting on the Nomura/JMMA Japan Manufacturing PMI data, Minoru Nogimori, Economist of Financial & Economic Research Centre at Nomura, said: “The month-on-month increase of 7.6 points in April’s headline PMI was the largest upswing since data were first compiled in October 2001. It shows that manufacturing activity has begun its adjustment and is now on the mend rapidly. We think that stabilization in overseas economies constitutes the main factor behind the abrupt slowdown in the rate of contraction. Indeed, the New Export Orders Index registered a record monthly rise of 10.3 points in April.”
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.
