Tokyo, Aug. 1 (BNA): Japanese manufacturing activity expanded at the weakest rate in 10 months in July, as pressure from rising prices and supply disruptions hurt production and new orders, suggesting that a strong economic recovery after the pandemic remains elusive.
Japan’s au Jibun Bank Manufacturing Purchasing Managers’ Index (PMI) fell to a seasonally adjusted 52.1 in July from the final 52.7 the previous month.
That was the slowest pace of growth since September last year, and was just below the flash reading of 52.2, Reuters reported.
The PMI survey showed that manufacturing activity suffered from contractions in production and aggregate new orders as well as a slowdown in the expansion of the backlog.
Companies continued to increase hiring levels, while also maintaining confidence about conditions in the coming year, although the degree of optimism has not changed much since June.
“The headline PMI has masked some worrying trends when looking at the underlying sub-indices, which add downside risks to the sector,” said Osama Bhatti, an economist at S&P Global Market Intelligence, who compiles the survey.
“New order flows fell for the first time in 10 months, while production levels experienced their first contraction since February,” Bhatti added.
“Weak demand conditions also contributed to reducing pressure on operating capacity,” he said.
Backlog increased at the lowest rate in 17 months, indicating further weakness in production over the coming months.
Official data painted a brighter picture of manufacturing activity, which showed Japanese factories in June increased production at the fastest pace in more than nine years as disruptions over China’s restrictions on COVID-19 eased.
Government officials also warned of continued downside risks to production with continued delays in the supply of spare parts.
This is one of the many reasons why the BoJ is firmly committed to its ultra-low policies despite the global trend of higher interest rates to combat rampant inflation.
ZHB