Japan factory activity down for fifth month in November: PMI

[TOKYO] Japan’s manufacturing activity contracted for a fifth month in November, albeit at a slower pace than in the previous month due to a softer decline in output, a private-sector survey showed on Thursday (Nov 20).

The S&P Global flash Japan Manufacturing Purchasing Managers’ Index (PMI) rose to 48.8 in November from October’s final 48.2, marking the fifth consecutive month below the 50 threshold that separates growth from contraction.

Among the key sub-indexes, factory output showed improvement, climbing to a four-month high, suggesting that the business environment for manufacturers is edging towards stabilisation.

However, new orders continued to decline, though at a slower rate than in October, reflecting subdued domestic and global demand. Overseas demand remained particularly weak, with new export orders falling at the fastest pace in three months.

By contrast, service firms showed resilience as the flash Japan services PMI stayed at 53.1 in November – the same rate as in the previous month. New businesses in the service sector grew at a faster pace, driven by solid domestic demand.

The robust service sector performance offset the sluggish factory activity to bolster the flash composite PMI to 52 from 51.5 in October. The composite indicator logged an eighth straight month of expansion.

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For both manufacturing and service sectors, “inflation remains a key concern”, said Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence.

Inflationary pressures intensified with input costs rising at the fastest pace in six months on a composite basis, largely attributed to higher labour and raw material costs. Firms raised their selling prices to secure profit margins, although the pace of output inflation slowed from October.

Fiddes noted that “business confidence regarding future output improved to the highest level since January,” contributing to the strongest employment growth since June. REUTERS