Six-Month Slide: Japan's Factory Activity Weakens, PMI Reports

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Japan's factory activity contracted for the sixth consecutive month due to weak demand, while the service sector continued to grow in December, according to business surveys released Monday. The au Jibun Bank flash Japan manufacturing purchasing managers' index (PMI) eased at a slower rate to 49.5 in December, up from 49.0 in November. The index has remained below the 50.0 threshold, indicating contraction, since June.

"There were diverging trends in demand, with services experiencing the strongest increase in new business in four months, while goods producers saw a sharper decline in orders," said Usamah Bhatti, economist at S&P Global Market Intelligence.

Business confidence in the manufacturing sector dropped to its lowest level since May 2022. Persisting cost pressures were evident, as input inflation accelerated to its fastest rate in four months, and output prices surged to the highest level since July.

On the other hand, the au Jibun Bank flash services PMI rose to 51.4 in December from 50.5 in November, reaching a four-month high. Despite the growth, business sentiment in the service sector fell due to concerns over labor shortages and rising costs, with input costs pushing selling prices higher at the fastest pace in eight months.

The au Jibun Bank flash Japan composite PMI, which combines both manufacturing and services activity, increased to 50.8 in December from 50.1 in November.

A quarterly Bank of Japan "tankan" survey from Friday showed a slight improvement in sentiment among big manufacturers, while non-manufacturers remained positive about business conditions through December. However, companies expect conditions to worsen over the next three months due to weak global demand and the potential impact of higher tariffs from U.S. President-elect Donald Trump.

Paraphrasing text from "Reuters" all rights reserved by the original author.