Japan Factory Activity Shrinks at Fastest Pace in 10 Months
TOKYO (Reuters) - Japan's manufacturing sector endured its steepest decline in ten months as subdued demand dragged down activity, according to a private-sector survey released Monday. Business sentiment plummeted to its lowest in over two years, indicating significant pressure on the manufacturing industry.
The final au Jibun Bank Japan manufacturing purchasing managers' index (PMI) plunged to 48.7 in January, falling below the preliminary reading of 48.8 and December's 49.6. The PMI has lingered below the 50.0 mark separating expansion from contraction for seven consecutive months, signaling ongoing weakness in the sector.
"Sluggish trends persisted throughout the manufacturing industry at the start of 2023," noted Usamah Bhatti of S&P Global Market Intelligence, the organization responsible for compiling the survey.
The crucial output subindex remained in contraction for the fifth consecutive month due to production cutbacks, particularly in investment and intermediate goods industries. New orders declined for the 20th consecutive month, with sentiment particularly weak in the automotive and semiconductor sectors.
Despite firms expressing optimism for the year ahead, their confidence dipped to its lowest level since December 2022, and the volume of outstanding business fell in January. "Businesses remained hopeful for an eventual demand recovery, but concerns lingered regarding its timing," Bhatti said.
Overseas orders retreated in January but at a slower pace than the previous month. While sales to the United States and mainland China were subdued, demand from Taiwan remained strong.
Inflation continued to impact Japanese manufacturers, with input and output prices remaining elevated. Hiring of experienced staff and filling of vacancies sustained growth in employment.