November 27, 2008 / 11:19 PM / 11 years ago

Japan PMI slides for ninth month, hits record low

(For accompanying table double click on [ID:nT97210])

By Yuzo Saeki

TOKYO, Nov 28 (Reuters) - Japanese manufacturing contracted for a ninth straight month to a new record low in November, the Japan Purchasing Managers Index showed on Friday, in yet another sign of the toll the global financial crisis is taking on the economy.

Japan slid into recession in the third quarter and some analysts say it may be the country’s longest ever contraction, as the crisis cuts demand for goods from Japan’s big exporters in key markets in Western countries and Asia. [ID:nLH554717]

New orders also tumbled, as companies face declining demand, economist Alex Hamilton from Markit, the research firm that carries out the survey, said in a statement, with the auto sector hardest hit.

The Nomura/JMMA Japan Purchasing Managers Index (PMI), which gives an early snapshot of the health of manufacturing, fell to seasonally adjusted 36.7 in November from 42.2 in October.

It was the lowest level since the survey started in 2001. A reading below 50 points to a contraction, while a figure above that suggests an expansion.

The output index fell to 30.9 in November from 39.7 in the previous month, its sharpest fall ever and leaving it in negative territory below 50 for the ninth consecutive month.

Industrial output in Japan fell 1.3 percent in the July-September quarter, marking the third straight quarter of decline, and analysts expect a further fall in October data due out on Friday at 8:50 a.m. (Thursday 2350 GMT). ECONJP

The PMI new orders index, an indicator of incoming new business, tumbled to 27.3 in November from 34.5 in October. The mechanical engineering and auto sectors logged the biggest falls in new order volumes.

New export orders also fell to a survey low of 31.1 with the auto sector — facing a massive contraction in global demand as the financial crisis dries up car loans — showing the sharpest decline.

Japan’s exports have been the main driver of economic expansion in recent years but they logged their biggest annual drop in seven years in October as the financial crisis hurt demand in the country’s biggest export markets. [ID:nT254579]

Rises in business costs, meanwhile, are subsiding, with the input prices index at 51.5 in November compared with 63.7 in October.

Companies surveyed cited stagnant market conditions and falling raw material prices as reasons behind slowing wholesale inflation.

Japanese business service prices fell by the largest amount in five years in the year to October, government data showed this week, and the OECD singled out Japan as facing the biggest threat of deflation among industrialised nations. [ID:nT55052]

The PMI’s employment index slipped to 42.3 in November, the lowest since March 2002, boding ill for consumer sentiment and domestic demand. (Reporting by Yuzo Saeki; Editing by Michael Watson)

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