Jibun Bank of Japan Manufacturing PMI for December

Japan’s manufacturing PMI economy approached stabilization at the end of 2024, amid more moderate and modest declines in new orders and output. Moreover, companies reported a ninth increase in employment in ten months, reversing the slight decline seen in November, and the strongest since April. However, the level of existing business continued to decline sharply in the absence of new order growth. On the price front, input price inflation strengthened to a four-month high as raw material prices continued to rise and the exchange rate weakened. In contrast, prices rose at the fastest rate since July.

The Jibun Bank of Japan Manufacturing Purchasing Managers’ Index (PMI®) – a single-digit composite measure of manufacturing performance – came in at 49.6 in December, up from 49.0 in November, indicating a slight contraction in the health of Japan’s manufacturing sector, the weakest for three months.

The latest data showed a more moderate decline in output at the end of the year. The rate of decline was only marginal, and moderated that seen in the previous month. Firms often cited subdued demand as the reason for the recent contraction, although there was some indication of new product introductions. Manufacturers also indicated a more moderate preference for using existing stocks, with the rate of exhaustion of finished goods inventories only fractionally.

New order volumes were reported to have stabilized in December, with the rate of decline slowing to a six-month low. Meanwhile, new export demand remained subdued amid evidence of weaker demand from key markets, most notably mainland China and the US. Against the backdrop of more moderate moderation in output and demand, employment growth resumed, reversing the marginal decline from November. The rate of job creation was modest, but reached its highest level on record since April.

Confidence in the future was positive in December

A decline in new orders allowed manufacturers to stay on top of current workloads in December, as backlogs of work were again severely depleted. Japanese manufacturers indicated that input price inflation rose at the end of 2024. Input prices rose at the sharpest pace since August, with a weaker yen and rising raw material and labor costs cited as the main sources of inflation. Firms responded by raising their own prices, at the sharpest pace in five months.

Despite the improving output picture, purchasing activity declined for the third straight month and at a moderate pace. At the same time, purchasing inventories also depleted for the third straight month and to the greatest extent since January 2021 as companies opted to use existing input stocks to complete production.

On the positive side, there was only a marginal lengthening in average delivery times for inputs in December. Manufacturers often reported that despite continued delivery delays and driver shortages, material availability continued to improve. Confidence in the future remained positive in December, and remains relatively strong in the context of the series’ history. Firms often anticipate that the mass production of newly launched products and business expansion plans will form the basis of positive sentiment, as well as optimism that the semiconductor and automotive markets will continue to recover.

S&P Global compiles the Japan Manufacturing Purchasing Managers’ Index (PMI) from responses to monthly questionnaires sent to purchasing managers in a panel of about 400 manufacturers. The panel categorizes companies by detailed sector and workforce size, based on contributions to GDP.

Survey responses PMI in the second half of each month

Survey respondents submit their answers in the second half of each month, showing the direction of change compared to the previous month. The survey calculates a diffusion index for each variable. The index is the sum of the percentage of “up” responses and half the percentage of “unchanged” responses. The indexes range from 0 to 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 indicating an overall decrease. The indexes are then seasonally adjusted.

The headline figure is the Purchasing Managers’ Index (PMI). The Purchasing Managers’ Index (PMI) is a weighted average of the following five indicators: new orders (30%), output (25%), employment (20%), suppliers’ delivery times (15%) and purchase inventories (10%). To calculate the PMI, analysts invert the suppliers’ delivery times index so that it moves in a similar direction to the other indicators. The underlying survey data remain unchanged after publication, but seasonal adjustment factors may change from time to time as needed.

Data collection occurred from December 5 to 16, 2024. The Japan Manufacturing PMI, published by au Jibun Bank Japan, S&P Global compiles from responses to monthly questionnaires sent to purchasing managers in a panel of about 400 manufacturers. The panel is classified by detailed sector and size of the firm’s workforce, based on contributions to GDP.

Survey responses collect in the second half of each month and indicate the direction of change compared to the previous month. A diffusion index calculates for each survey variable. The index is the sum of the percentage of “up” responses and half the percentage of “unchanged” responses. The indexes range from 0 to 100, with a reading above 50 indicating an overall increase compared to the previous month.