Japan’s manufacturing sector data
for May published today showed a return to growth as supply chain pressures
enabling firms to resume factory operations following the disruption caused by
the March 11 Tohoku earthquake. On the demand side, overall new business
decreased marginally, while firms reduced their staff numbers for the second
month in succession. Meanwhile, output charges rose for the first time since
November 2008 in response to strong cost inflation.
In official data published
today, Japanese industrial output was up a seasonally adjusted 1% in April from
the previous month, the Ministry of Economy, Trade and Industry said. Meanwhile,
Japan’s unemployment rate rose to 4.7% in April from 4.6%, the statistics bureau
said in a report in Tokyo. The median forecast of 30 economists surveyed by
Bloomberg News was for the rate to rise to 4.7 percent.
The seasonally adjusted headline Purchasing
Managers’ Index (PMI)posted 51.3 in May, up
from 45.7 in April, signalling a modest improvement in manufacturing sector
operating conditions. The month-on-month rise in the index was among the largest
since data were first compiled in October 2001.
Overall new business fell
further in May, although the pace of reduction was only marginal. New export
orders fell at a similarly mild rate, extending the current period of decline to
three months. Anecdotal evidence suggested that demand remained subdued
following the earthquake and tsunami, with China and the US mentioned in
Despite this, manufacturing production
increased in May, ending a two-month period of substantial decline. The index
measuring month-on-month movements in output climbed more than sixteen points to
signal a modest rate of expansion. Manufacturers commented that renewed
production growth reflected the resumption of factory operations in the wake of
A sharp easing in supply side pressures in
May enabled many firms to restart production lines. Around 24% of panellists
reported longer lead times from one month ago, but this was down from 55% in
April. The rate of delivery time lengthening remained steep nonetheless.
Stocks of finished goods rose in May, ending
a ten-month period of decline. This in part reflected efforts to build
stockpiles in anticipation of future power outages.
Higher output requirements, on average,
prompted firms to increase their purchasing activity for the first time since
February. There were also reports that firms had acquired inputs in an attempt
to safeguard against supply side disruptions. Consequently, the rate at which
stocks of purchases were depleted eased sharply since April.
Manufacturing employment in Japan fell for a
second successive month during May. However, the rate of job shedding was only
marginal. Where a fall in staff levels was recorded, panellists linked this to a
combination of resignations and the non-renewal of temporary contracts.
Manufacturers that added to their workforce numbers attributed growth to
On the prices front, input cost inflation
eased to a four-month low in May, but remained steep nevertheless. Higher raw
material prices and, in some cases, increased fuel costs drove the latest rise
in purchasing costs. This in turn contributed to the first month-on-month rise
in output prices since November 2008.
Commenting on the Japanese Manufacturing PMI
survey data, Alex Hamilton, economist at Markit and author of the report said:"PMI survey data pointed to a welcome
rebound in Japanese manufacturing activity in May, as a sharp easing in supply
chain pressures enabled firms to restart production lines following the
disruption caused by March’s earthquake and tsunami. The index measuring trends
in production jumped almost 17 points to signal a return to growth for the first
time since February. Production was also boosted by firms building up their
stocks of finished goods, which rose for the first time in eleven months, in
anticipation of summer power outages.
supply side constraints meant that firms were able to acquire additional inputs
in May, making them less reliant on their inventory holdings. This was signalled
by a record easing in the rate of pre-production stock depletion.
Disappointingly, manufacturers continued to cut their payroll numbers,
reflecting uncertainty about the rate at which the economy can recover."
The Markit/JMMA Japan Manufacturing
PMI is based on data compiled from monthly replies to questionnaires sent to
purchasing executives in over 400 industrial companies.