Japan’s factory activity shrinks in July as orders weaken: PMI

JAPAN’S manufacturing activity extended declines in July while growth in the service sector slowed, surveys showed on Monday (Jul 24), as weak demand and souring confidence weighed on business in the world’s third-largest economy.

The au Jibun Bank flash Japan manufacturing purchasing managers’ index (PMI) fell to 49.4 in July from 49.8 in June. The 50.0 index point threshold separates contraction from expansion.

New orders fell at the fastest pace since March, while output and new export orders extended their falls, albeit at a slower pace.

“Demand conditions at private sector firms were less buoyant than in the previous survey period, with latest data pointing to only a marginal increase in new orders,” said Usamah Bhatti, economist at S&P Global Market Intelligence, which compiled the survey.

The au Jibun Bank flash services PMI slumped to a seasonally adjusted 53.9 in July from 54.0 in the previous month, the weakest since January. The service sector saw the slowest growth in new businesses since January, while employment reversed its growth trend.

Cost pressures in manufacturing continued to ease with input prices growing at the slowest pace since February 2021.

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Output prices in both the manufacturing and service sectors gathered pace, with factories seen passing on higher costs to consumers for the first time since April.

Japan said on Friday its core inflation in June exceeded the central bank’s 2 per cent target for the 15th month in a row, but an index stripping away the effects of energy costs slowed, the first slowdown since January 2022.

The au Jibun Bank Flash Japan composite PMI, which combines readings for both manufacturing and service sector activity, was 52.1 in July, unchanged from June. REUTERS