Japan: Manufacturing PMI posts second straight monthly gain in November - Nomura

FXStreet (Delhi) – Research Team at Nomura, notes that the Japanese manufacturing PMI for November came in at 52.8, rising 0.4pt from October's 52.4, marking the second straight monthly rise after October's 1.4pt, suggesting ongoing improvement in manufacturing activity and further indicating that the economy is firming in FY15 H2.

Key Quotes

“PMI data a mixed bag, but export orders index up for second straight month: Among the five component indices, there were positive contributions to the headline PMI from the output index (+1.5pt, from 52.4 in October to 53.9 in November), the supplier delivery times index (-0.6pt, from 49.8 to 49.2; a fall in this index pushes up the headline PMI), and the employment index (+0.3pt, from 52.4 to 52.7), and negative contributions from the new orders index (-0.2pt, from 54.2 to 54.0) and the stock of items purchased index (-0.7pt, from 50.4 to 49.7). All of that adds up to a mixed bag. The decline in the new orders index points to a possible deceleration in manufacturing activity, through the data is only for a single month.

However, the new export orders index—which is not included in the headline PMI calculations—rose for the second straight month, by 1.0pt (from 52.2 in October to 53.2), which we see as showing the strength of overseas demand, which has a major influence on manufacturing activity.

No increase in stock of completed items; product price index rises: Among other subindices, the order backlog index fell 0.5pt m-m (from 49.8 in October to 49.3 in November), the stock of completed items index fell 1.7pt (from 49.5 to 47.8), the purchasing volume index rose 1.3pt (from 51.8 to 53.1), the purchasing price index rose 0.5pt (from 50.7 to 51.2), and the product price index rose 2.0pt (from 48.5 to 50.5). We think the continued absence of an increase in the stock of completed items along with the rise in the product price index in November suggests manufacturing activity is well balanced.

Further indication of ongoing firming in economy in FY15 H2: The second consecutive quarter of negative growth in Japan's real GDP in Jul-Sep reflected largely a decline in inventories; final demand does not appear to have deteriorated that much. We expect Japan's economy to get back on an expansionary track in Oct-Dec supported by growth in key demand items. The survey of production forecasts also points to companies expecting production to firm. We see the October and November Japanese manufacturing PMI statistics as consistent with this view.”
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