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Japan PMI: Output and New Orders Contract Further

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    September 30, 2012

    The global economy continues to weaken most everywhere you look. The focus of this post is Japan where the Markit/JMMA Japan Manufacturing PMI™ shows Modest deterioration in operating conditions recorded in September.

     Key points:

    Output and new orders both down again, albeit at slower rates
    Weaker underlying demand and strong yen impact on export orders
    Charges cut at sharpest rate for over two years


    Operating conditions in Japan’s manufacturing sector continued to worsen at a modest pace in September. Output and new orders both fell amid reports of a general stagnation of economic activity in domestic and overseas markets. Manufacturers continued to deplete inventories, while they made further sharp inroads into their work outstanding. Payroll numbers were little changed.

    On the price front, companies responded to the weaker demand environment by discounting their charges to a greater degree. These efforts were aided in part by a further modest reduction in input prices.

    After adjusting for seasonal factors, the headline Markit/JMMA Purchasing Managers’ Index™ (PMI™) improved to a three-month high of 48.0 in September (August: 47.7) but, by remaining below the 50.0 no-change mark, again signalled a modest deterioration in operating conditions.

    Production and new order volumes continued to decline on a monthly basis. Although slightly weaker than in August, rates of contraction remained marked, particularly in the investment goods sector.

    Looking ahead, the widening rift between Japan and China over disputed islands certainly cannot help yet Voice of America reports there is No Sign of Progress in Dispute.

     September 26, 2012
    A bitter territorial dispute between China and Japan showed no signs of improvement Tuesday, as foreign ministers from both countries held high-level talks to ease tensions.

    Relations have sunk to their lowest point in years, with anti-Japan protests breaking out across China and many Chinese refusing to buy Japanese-made goods. On Wednesday, Japanese automakers Toyota and Nissan said they are reducing production in China because of lessened demand.

    [Foreign Minister Yang Jiechi] warned that bilateral relations could not “return to the track of sound and steady development” unless Japanese officials “take concrete measures to correct its mistakes.”

    Mike “Mish” Shedlock
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    Images: Flickr (licence attribution)

    About The Author

    Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.  Visit Sitka Pacific’s Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

    You are currently viewing my global economics blog which typically has commentary every day of the week. I am also a contributing “professor” on Minyanville, a community site focused on economic and financial education.  Every Thursday I do a podcast on HoweStreet and on an ad hoc basis contribute to many other sites.

    When not writing about stocks or the economy I spend a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com.