Growth in factory activity in Japan in July slows as production and new orders contract

FILE PHOTO – A worker walks near a factory at the Keihin Industrial Zone in Kawasaki, Japan March 8, 2017. REUTERS/Toru Hanai

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TOKYO, Aug 1 (Reuters) – Japanese manufacturing activity grew at the weakest pace in 10 months in July as rising price pressure and supply disruptions hurt output and news orders, suggesting that a strong post-pandemic economic recovery is still a long way off.

The final Jibun Bank Japan Manufacturing Purchasing Managers’ Index (PMI) fell to a seasonally adjusted 52.1 in July from the previous month’s final of 52.7.

That marked the slowest pace of growth since September last year and was slightly below a flash reading of 52.2.

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Japan’s economy has struggled to recover in a safe manner from the pandemic hit, with recurring COVID surges in China, war in Ukraine and soaring commodity prices all weighing on foreign demand.

Manufacturing activity suffered from shrinking output and overall new orders as well as a slower expansion of the labor backlog, the PMI survey showed.

Nevertheless, companies continued to increase their workforce, while remaining confident about the conditions ahead, although the degree of optimism was little changed from June.

“The global PMI masked some worrying trends when looking at the underlying sub-indices, which add downside risks to the sector,” said Usamah Bhatti, economist at S&P Global Market Intelligence, which compiles the report. investigation.

New order entries fell for the first time in 10 months, while production levels saw their first contraction since February, Bhatti added.

“Lower demand has also helped reduce pressure on operating capacity,” he said.

“Labour backlogs grew at the slowest pace in 17 months, suggesting further weakening in output over the coming months.”

Official data released on Friday painted a brighter picture for manufacturing activity, which showed Japanese factories increased output in June at the fastest pace in more than nine years as disruptions from Chinese restrictions linked to COVID-19 have subsided. Read more

But a government official also warned that the risks of lower production remained as delays in the supply of spare parts persisted. This is one of the many reasons why the Bank of Japan remains steadfast in its ultra-low policies despite a global trend of higher interest rates to fight runaway inflation. Read more

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Reporting by Daniel Leussink Editing by Shri Navaratnam

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