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Manufacturing sector in Japan improves at sharpest rate for 44 months

Staff Writer | December 5, 2017
Growth in the Japanese manufacturing sector gathered momentum in the latest survey period.
Manufacturing Japan
Japan   Nikkei Japan Manufacturing PMI
New business expanded at the fastest rate since March 2014, while rising demand from China supported a nine-month high in export growth.

In turn, firms raised production to the greatest extent in 45 months.

Meanwhile, deteriorating delivery times and robust demand conditions intensified capacity pressures.

In line with greater production requirements, firms boosted employment.

On the price front, input costs continued to rise at a far steeper rate than output prices.

The headline Nikkei Japan Manufacturing Purchasing Managers’ Index (PMI) – a composite single-figure indicator of manufacturing performance – increased in November to 53.6, from 52.8 in October.

This signalled the strongest improvement in manufacturing sector conditions since March 2014.

New orders placed with Japanese manufacturers increased at the most marked pace for 44 months in November.

According to anecdotal evidence, new business inflows were underpinned by demand from overseas.

In turn, new export orders rose at the quickest pace since February.

Stronger demand prompted businesses to raise production.

In fact, output growth accelerated for the fourth month in succession to a 45-month high.

However, panellists indicated that greater incoming new orders resulted in higher volumes of unfinished work.

Backlogs of work were accumulated at the fastest rate since March 2014.

Other survey respondents indicated that outstanding business was a consequence of delayed suppliers’ delivery times.

Pressure on supply chains continued to rise in the latest survey period.

Average lead times deteriorated for a nineteenth consecutive month, albeit to the weakest extent since August.

Nikkei Japan Manufacturing PMI 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 25 30 35 40 45 50 55 60 50 = no change on previous month, S.


Increasing rate of expansion Increasing rate of contraction To fulfil incoming new orders, firms used inventories of finished goods.

The rate of depletion quickened to the joint-fastest since December 2016, on a par with July.

In line with greater demand, Japanese manufacturers enhanced operating capacity by taking on more staff.

The rate of job creation was solid and quickened to a six-month high.

Panel members suggested that employment was expanded to cater for the influx in new business.

Japanese manufacturers increased average prices charged in November amid stronger sales.

The rate of inflation accelerated slightly for the third consecutive month in line with increased costs of production.

Raw material price hikes were widely reported by companies surveyed in November.

Input price inflation quickened from October to a 35-month high.

Nonetheless, companies were not deterred by rising input prices, boosting purchasing activity in line with greater output requirements.

Japanese manufacturers also had to deplete pre-production inventories for use in production.

Lastly, business optimism strengthened during November.

New product launches and forecasts of higher new orders were cited as reasons to be confident.