Japan: Manufacturing activity gaining momentum - Nomura

Analysts at Nomura note that the Japanese manufacturing PMI for April came in at 52.8, up 0.4pt from March's reading of 52.4. The rise in the PMI suggests manufacturing activity is gaining momentum. 

Key Quotes

Improvement in the bulk of the component indices 

Looking at the five component indices, the manufacturing PMI was boosted by positive trends in the output index (53.0 in March, 53.6 in April), the employment index (53.2 in March, 53.7 in April), the stock of items purchased index (50.0 in March, 50.2 in April), and the supplier delivery times index (down from 48.8 in March to 47.6 in April, a decrease in this index pushes up the headline index), with a variety of areas suggesting manufacturing activity is picking up. While the new orders index fell from 52.7 to 52.5, it is still above the 50 watershed between expansion and contraction.” 

New export orders index suggests rise in exports sustainable 

We are focusing on exports as one driver of economic expansion. The new export orders index, a leading export indicator, rose 2.0pt from 51.9 in March to 53.9 in April (this index is not used directly in the calculation of the manufacturing PMI). Japan trade statistics announced yesterday showed a swing to solid exports in Jan-Mar, and the new export orders index looks to be positive news in terms of the sustainability of this uptick. We believe that the firm exports stem from a rise in cyclical demand for smartphones and construction machinery in Asia.”

Results consistent with our economic outlook 

We consider the results of the Japan manufacturing PMI to be consistent with our outlook for relatively high economic growth of more than 1% annualized in 2017 H1, as the results seem to suggest that the improvement in manufacturing activity is gaining momentum and that growth in exports is sustainable.”

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