Japan PMI: falling more slowly in September

by SR on September 30, 2012

Japan manufacturing PMI to September 2012

Rate of decline slowing?

A month ago we discussed the Markit/JMMA Japan Manufacturing PMI™ and how it might lead auto production. My conclusion was that the Japan PMI has led tops and bottoms in auto production in the past and the headline figure is released far more quickly than auto output data. So, it probably is worth watching. The Japan PMI data for the month of September was released on 28 September 2012 and the press release can be viewed for the next few weeks here. The headline figure ticked up very slightly from 47.7 in August to 18.0 in September 2012, so it was still in a contraction phase but the rate of decline was a smidgin slower. To comment on a few points from the press release:

  1. New orders fell. Our take: Companies likely eroded their order backlogs further and Markit reports continued weakness in overseas demand, with China specifically mentioned. This is congruent with the recent pattern of machinery and bearing orders.
  2. No problems with capacity or lead times. Our take: not surprising, this. There may be a few localised areas of tightness, but on the whole companies are underworked.
  3. Input costs fell, but so did product prices. Our take: raw material costs have been drifting lower (see our comment on natural rubber in the context of tyre sales here, but Markit points to reports of lower prices, so presumably many companies are passing these lower costs on to customers.

Edit: here’s an example of order backlog erosion. This is the machine tool order backlog data up to August 2012, which came out last week courtesy of the Japan Machine Tool Builders Association.

Japan machine tool order backlog by month (JMTBA) in billion yen to August 2012

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