Japan’s manufacturing conditions continue to improve in November

Manufacturing conditions in Japan continue to improve in November; however, at a slower pace. The Flash Japan Manufacturing PMI dropped to 51.1 in November from 51.4 in October. The PMI index remains above the threshold of 50. Index above 50 indicates an expansion, whereas below 50 it implies a contraction. The Manufacturing Output Index fell marginally to 52.2 in November from 53.3 in October. Production has increased for the fourth straight month.

Looking at individual components, new orders, new export orders, output and employment all increased in November, albeit at a slower pace. Input priced increased in November, whereas output prices remained unchanged in the month. Stocks of purchases also increased in November. On the other hand, backlogs of work and stocks of finished goods decreased, but at a slower pace. Quantity of purchases decreased at a more rapid pace.

“Data suggested that international demand was the key driver behind the expansion in total new sales. Meanwhile, employment growth eased from October’s 30-month high and was only marginal overall, suggesting manufacturers were less confident towards the outlook. Finally, cost inflation has recorded for the first time since December 2015, linked by firms to greater raw material prices, particularly fuel-related items”, said IHS Markit economist Amy Bronbil.

At 05:15 GMT, the USD/JPY pair is trading at 112.74. Meanwhile, at 05:00 GMT the FxWirePro's Hourly Strength Index of Japanese yen was slightly bearish at -69.6741, while the FxWirePro's Hourly Strength Index of USD was neutral at 31.9171. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex