November’s seasonally adjusted Nomura/JJMMA Japanese Manufacturing Purchasing Managers’ Index remained below the critical 50.0 no-change mark for a ninth successive month in November to indicate a further deterioration of operating conditions in the Japanese manufacturing sector. Moreover, the headline index posted its lowest level in the survey history, registering 36.7, down from 42.2 in October.
Production in the Japanese manufacturing sector declined at the steepest rate in over seven years of data collection during November and for the ninth month in succession. Where a fall in output was recorded, firms usually linked this to lower levels of new business and fears of a protracted economic slowdown.
Levels of new work fell at a series-record pace in the latest survey period, reflecting poor demand and rapidly deteriorating market conditions. New order volumes have now declined in each of the previous nine months. Following the trend in new work, export orders fell at the most marked rate since the inception of the series in October 2001. Japanese manufacturers attributed the latest fall to weak demand from overseas, as the global economic climate continued to deteriorate throughout the month.
Average input prices rose at a modest pace in November, in contrast to strong cost inflation recorded through much of 2008 so far. In fact, the latest round of inflation was the slowest since December 2003, with a wide range of raw materials reported to have actually fallen in price. Average output charges rose for the 15th month in succession in November, albeit at a marginal rate. Manufacturers indicated that their pricing power weakened in line with poor demand.
Firms were able to clear existing contracts at the sharpest rate since data collection began. Anecdotal evidence linked the latest acceleration of backlog clearance to lower new work, as the economic slump deepened over the course of the month.
Staffing levels at firms operating in the Japanese manufacturing sector fell for the fourth consecutive month in November. Moreover, firms reduced the size of their workforces at the sharpest rate since March 2002. Reasons provided by the survey panel attributed lower employment to declining new order volumes and adverse economic conditions.
Finally, purchasing activity amongst Japanese manufacturers declined markedly in November largely in response to falling production requirements.
Commenting on the Nomura/JMMA Japan Manufacturing PMI data, Minoru Nogimori, head of financial and economic research at Nomura, said: “The PMI has been below 50.0 for nine consecutive months, suggesting that Japanese manufacturers face more severe conditions. We think manufacturers will remain weak for the time being due to the slowdown of exports. With production activity in the manufacturing sector deteriorating, the Employment Index also has fallen sharply. We expect the unemployment rate to rise rapidly through to the year-end.”
