Japan’s Manufacturing Sector Teeters Between Growth and Stagnation

Posted on December 30, 2011

Manufacturing sector activity in Japan shows negligible improvement in December according to the Markit® PMI surveys. The manufacturing index for December moves back into growth territory at 50.2, up from 49.1 in the previous month.

New orders were down for the 4th successive month & manufacturing output sagged. Lower new business orders and production was not enough to keep order backlogs from sinking further. Despite the lower demand, employment did increase modestly during the month. Prices for raw materials are still rising, but at a subdued pace. Selling prices were marginally higher during the month.

Commenting on the Japanese Manufacturing PMI survey data, Alex Hamilton, economist at Markit® and author of the report said:

“Japanese manufacturers registered an improvement in overall operating conditions during December, in spite of continued declines in incoming new business, output and stocks of purchases. Employment growth and a greater incidence of delivery delays exerted a positive influence on the headline PMI reading. Longer delivery times are usually associated with better business conditions, with suppliers struggling to meet agreed delivery schedules in the face of rising demand for inputs. However, the latest PMI survey showed that the deterioration in average vendor performance, which was the sharpest since the earthquake-related disruption in May, predominantly reflected the impact of widespread flooding in Thailand.”

PMI Index Aug Sep Oct Nov Dec
Manufacturing 51.9 49.3 50.6 49.1 50.2