According to a business survey, Japan’s factory activity experienced expansion for the first time in a year in May. This follows a prolonged period of manufacturing weakness.
In May, the au Jibun Bank flash Japan manufacturing purchasing managers’ index (PMI) rose to 50.5 from 49.6 in April, exceeding the 50.0 threshold that differentiates growth from contraction, last observed in May of the previous year.
“The business activity’s increase was primarily driven by services, but the near-stabilisation of manufacturing output gives hope for wider growth later in the year,” Jingyi Pan, economics associate director at S&P Global Market Intelligence, who compiled the survey, stated.
Both output and new orders, the two primary subindexes that contribute to the main figure, contracted at a slower rate, while stocks of purchases increased at the quickest rate in ten months.
However, manufacturers’ confidence dipped as inflationary pressures increased input costs and output prices.
Japan’s business-to-business wholesale inflation remained stable at 0.9% in April, with the yen’s depreciation increasing import costs, according to data from the government last week. Analysts anticipate this to rise in the coming months.
Simultaneously, the service sector continued to expand in May, albeit at a slower rate due to reduced new business growth.
The au Jibun Bank flash services PMI fell to 53.6 in May from 54.3 in April.
Nonetheless, the survey indicates a swift increase in employment levels due to robust business confidence.
Both average input costs and output prices increased at a slower rate, but inflation stayed significantly above their respective long-term averages.
The au Jibun Bank flash Japan composite PMI, which includes both manufacturing and service sector activity, marginally climbed to 52.4 in May from 52.3 in April, marking the highest score since August of the previous year.
