Japan's Factory Activity Hits 10-Month Low Amidst Slow Demand
TOKYO (Reuters) - Japan's manufacturing sector suffered a significant decline in January, with factory activity contracting at its fastest pace in 10 months. A private-sector survey released Monday revealed that sluggish demand has severely impacted the industry, pushing business confidence to its lowest point in over two years.
The au Jibun Bank Japan Manufacturing Purchasing Managers' Index (PMI) registered a dismal 48.7 in January, below the preliminary estimate of 48.8 and the 49.6 recorded in December. The PMI has consistently remained below the 50.0 threshold, indicating ongoing weakness within the manufacturing sector for the past seven consecutive months.
"The (manufacturing) industry experienced sustained lackluster trends at the beginning of 2023," stated Usamah Bhatti of S&P Global Market Intelligence, the entity responsible for compiling the survey data.
Key sub-indices, such as output, remained in contraction for the fifth consecutive month, driven by production cuts particularly in investment and intermediate goods sectors. New orders also extended their downward trend for the 20th consecutive month, with particularly weak sentiment in the automotive and semiconductor sectors.
Despite some optimism among firms regarding the year ahead, overall sentiment weakened to its lowest level since December 2022 while the volume of outstanding business declined in January. "Firms expressed optimism in an eventual demand recovery, but concerns persist regarding the timing of such improvement," Bhatti explained.
Overseas new orders saw a slight improvement in January compared to the previous month. While sales to the United States and mainland China remained subdued, Taiwan exhibited strong demand.
Inflation continued to burden Japanese manufacturers in January, with both input and output prices remaining elevated. Employment within the sector expanded, with firms actively hiring experienced staff and filling vacant positions.