Japan's manufacturing growth cools to nine-month low in May - flash PMI

FILE PHOTO: Newly manufactured cars await export at port in Yokohama, Japan, November 15, 2017. REUTERS/Toru Hanai

TOKYO, (Reuters) - - Japanese manufacturing activity expanded at the slowest pace in nine months in May as new orders cooled, a preliminary survey showed on Wednesday, signalling a softening in domestic demand that could hamper an economic rebound.

The flash Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 52.5 in May - the lowest level since August 2017 - from a final 53.8 in April.

Still, the index has remained above the 50 threshold that separates expansion from contraction for the 21th consecutive month.

“Despite the promising upturn in April data, May’s flash release erred on the side of disappointment as the headline figure signalled the weakest expansion in manufacturing growth in nine months,” said Joe Hayes, economist at IHS Markit, which compiles the survey.

The flash index for new orders fell to 52.3 in May from a final 53.8 in the previous month in a sign that domestic consumption in the world’s third-biggest economy weakened slightly. Output also expanded at a slower pace from April.

However, the index for new export orders rose to 51.0 from 50.4 in April, pointing to a pick up in world demand. A global boom in exports has underpinned many of the trade-reliant regional economies over 2017 and into 2018.

However, Japan’s economy ended its best run of expansion in decades as gross domestic product contracted more than expected in the first quarter of this year due to weak consumer spending, business investment and exports.

Many economists say this decline will be temporary, but there are doubts about how strongly the economy will bounce back.

The latest PMI reading for May suggests the economy began the second quarter in subdued fashion, which will no doubt keep policy makers nervous as they seek to sustainably lift Japan out of decades of stagnation and deflation.

Reporting by Stanley White; Editing by Shri Navaratnam