Japan: Manufacturing PMI dips into negative territory in May on trade concerns
May 23, 2019
The Nikkei flash manufacturing Purchasing Managers’ Index (PMI) fell from April’s 50.2 (previously reported: 49.5) to 49.6 in May. Therefore, the index now sits below the 50-point threshold that separates expansion from contraction in the manufacturing sector.
May’s reading reflected that all-important output and new orders declined at a faster rate compared to April’s print. Moreover, employment growth lost some steam in the same month. Stocks of purchases decreased further in May, while suppliers’ delivery times continued to lengthen. The decline in new export orders accelerated in May, reflecting weak global demand and mounting uncertainty following escalating trade tensions between China and the United States.
Joe Hayes, economist at IHS Markit, which compiles the survey, noted that:
“Following some tentative signs that the downturn in Japan’s manufacturing sector had softened in April, flash data for May revealed these were short-lived, as output and export orders fell at stronger rates. The re-escalation of US-China trade frictions has heightened concern among Japanese goods producers. Underlying growth weakness across much of Asia led to struggling exports, which fell at the sharpest rate in four months. Difficulties on the international front merely add to uncertainties domestically, with upcoming upper house elections in July, and the impending sales tax hike later this year.”
Japan Industrial Production Forecast
FocusEconomics Consensus Forecast panelists see industrial production rising 0.7% in 2019, which is down 0.4 percentage points over the previous month’s projection. For 2020 the panel expects industrial production to expand 1.0%.