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The Japanese manufacturing PMI for May came in at 52.5, down from April’s reading of 53.8, notes the research team at Nomura.

Key Quotes

“While the index remains high in absolute terms and manufacturing activity continues to expand, we note that the result is nevertheless the lowest since August 2017, suggesting that the pace of expansion may be entering a slowdown.”

“Among the five component indices, four exerted a drag on the headline PMI: the output index fell to 52.8 (from 54.3 in April), the new orders index fell to 52.3 (from 53.8), the stock of items purchased index fell to 47.1 (from 51.8), and the employment index fell to 52.0 (from 53.6). The only component index making a positive contribution was the supplier delivery times index, which fell from 45.3 to 43.3 (a decline in this index pushes up the headline index).”

Growth in output could end up being weaker than expected in Apr-Jun and beyond

Our view remains unchanged that the global economy is likely to continue to expand at a healthy clip and that Japan’s manufacturing activity is also likely to trend briskly for the time being. That said, with the manufacturing PMI continuing to show a slowing trend since the beginning of the year, we see a risk that the pace of economic recovery could be weaker than we have been expecting in Apr-Jun and beyond.”