Japan June flash manufacturing PMI drops for 4th straight month

Japan’s flash manufacturing purchasing managers’ index (PMI) for the month of June, declined almost at the same pace as in the previous month, on lingering concerns over supply chain disruptions due to a massive earthquake in April and falling exports.

The Markit/Nikkei Japan Flash Manufacturing Purchasing Managers Index (PMI) was a seasonally adjusted 47.8 in June, little changed from a final reading of 47.7 the previous month. The index remained below the 50 threshold that separates expansion from contraction for the fourth straight month. The preliminary index for new orders was 45.8, higher than 44.7 in the previous month, but still showing five consecutive months of contraction.

"Latest survey data pointed to a further deterioration in manufacturing conditions in Japan. Both production and new orders declined at marked rates, led by a sharp drop in international demand," Markit said.

A massive earthquake had hit the southern region of Japan in the manufacturing hub of Kumamoto during mid-April that triggered destruction and further slowdown in Japan’s economic activity. Japan's economic growth is expected to ease to an annualized 0.5 percent in the second quarter from 1.9 percent the previous quarter as exports slow, a Reuters poll of economists showed.

The Japanese yen has surged 15 percent against the dollar so far this year and there are worries that further gains in the JPY will hurt exports and corporate earnings, thereby forcing companies to cut down production. Further, Markit noted that employment growth eased to the weakest in nine months of expansion, suggesting further stimulus may be needed to support the economy.