Japan: Manufacturing PMI slides in May
The Nikkei flash manufacturing Purchasing Managers’ Index (PMI) decreased to 52.5 in May from April’s revised 53.8 (previously reported: 53.3), marking the lowest print since August 2017. Nonetheless, the index remained comfortably above the 50-point threshold that separates expansion from contraction in the manufacturing sector.
May’s downtick was primarily driven by weaker new orders growth, which expanded at the slowest pace in nine months. Output growth and backlogs of work softened as well, in line with weaker demand. Consequently, employment growth eased and purchasing activity declined in the month. Despite weaker new orders growth and output growth, supplier delivery times lengthened in May, suggesting supply-side constraints could be weighing on output potential. On a brighter note, foreign orders rebounded in May on the back of a weaker yen. On the price front, input price inflation continued to accelerate in May, and suppliers raised output prices at a stronger rate in response.
Regarding supply dynamics, Joe Hayes, Economist at IHS Markit, commented:
“There was further evidence that supply-side constraints may be impacting output potential, as material shortages contributed to the greatest lengthening of delivery times in seven years. Consequently, input prices soared at the fastest pace in 52 months.”