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The Biggest Decline In Industry Activity In 2-1/2 Years Is Seen In Japan

According to a private study, manufacturing activity in Japan dropped in February at the sharpest rate in more than two years, illustrating businesses’ challenges in the face of a global economic slowdown, rising raw material prices, and calls from authorities for higher pay.
After reaching 48.9 in January, the final au Jibun Bank Japan Manufacturing Purchasing Managers’ Index dropped to 47.7 in February. The drop was the fastest since September 2020, while being greater than the flash reading.

According to economist Usamah Bhatti at S&P Global Market Intelligence, which compiles the survey, “both new orders and production levels, which make up 55% of the headline PMI figure, fell at the fastest pace since July 2020 as weak domestic demand and a global economic slowdown hindered sales and output volumes.”

According to the poll, manufacturing output and new orders decreased for the eighth month in a row and at the quickest rates in 31 months.

The final PMI number comes a day after government statistics revealed that the car and semiconductor sectors caused Japanese companies to reduce output in January at the sharpest rate in eight months.

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The sub-index used to measure work backlogs was at its lowest level since September 2020, highlighting the waning customer demand.

While more businesses successfully passed on increased costs to customers, input price inflation slowed to its lowest rate in 18 months, while output price inflation increased for the first time in 4 months.

On the plus side, the poll found that supplier delivery delays were at their lowest level in two years.
According to recent data, Japan’s economy avoided going into recession last year, but its fourth-quarter recovery was far weaker than anticipated due to a decline in company investment. In the current phase of global monetary tightening, the Bank of Japan continues to stand out since it has pledged to keep interest rates at historically low levels to support its COVID-devastated economy.

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