Japanese manufacturing activity expanded in May for the first time in two months as domestic orders and output rose, suggesting the economy may be grinding higher again after faltering in April. The Markit/JMMA final Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 50.9 in May, unchanged from the preliminary reading but higher than a final 49.9 in April.
The index returned above the 50 threshold that separates contraction from expansion for the first time in two months. New orders rose to 50.9, versus a flash estimate of 51.2 and a final 48.8 in April. The output index rose to 51.9, slightly more than the flash estimate of 51.7 and 49.3 in April.
The index for new export orders was 50.6, slightly above a preliminary 51.2 and a final 50.3 in the previous month. An expanding manufacturing sector is important for the economy because it would suggest domestic demand is becoming stronger, which would lead to higher growth and make it more likely that the Bank of Japan can meet its 2 percent inflation target.