North Asia

Japan Factory Growth Slows Amid China Supply Chain Drags

 

Japanese manufacturing growth slowed in June as new orders shrank for the first time in nine months due to the deepening pressure on already disrupted supply chains.

Output grew at its slowest rate in three months, the au Jibun Bank flash Japan Manufacturing purchasing managers’ index (PMI) survey showed.

Covid-19 lockdowns have heavily affected trade-reliant economies such as Japan, taking a toll on Japanese manufacturing demand, even as service sector sentiment hit a nearly nine-year high as new domestic cases ebb.

The PMI slipped to a seasonally adjusted 52.7 in June from a final 53.3 in May, marking the slowest expansion since February when it also was 52.7. The 50.0 mark separates expansion from contraction.

In April and May, the Japanese manufacturing PMI also grew at a slower rate than in the prior month.

Overall new orders shrank for the first time in nine months due to the deepening pressure on already disrupted supply chains, while output grew at its slowest rate in three months, the survey showed.

 

Pickup in Tourism Helps

New business in the services sector rose for a second straight month as a pickup in tourism helped strengthen overall private-sector conditions.

Overall private-sector sentiment saw the sharpest rise since November amid the strongest expansion in services since October 2013, he said.

“Activity at Japanese private sector businesses rose solidly,” said Usamah Bhatti, an economist at S&P Global Market Intelligence, which compiles the survey.

The au Jibun Bank Flash services PMI Index improved to a seasonally adjusted 54.2 in June from the prior month’s 52.6 final.

The composite PMI, which is calculated by using both manufacturing and services, rose to 53.2 from a final of 52.3 in May.

The survey showed Japanese manufacturing firms continued to face widespread pressure from high raw material prices.

“Prices charged for Japanese goods and services rose at an unprecedented rate for the second successive month as higher material and staff cost burdens were partially passed through to customers,” Bhatti said.

 

  • Reuters, with additional editing by George Russell

 

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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.

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