Japan’s manufacturing sector continued to expand at a faster pace in June, supported by a sharp rise in new orders that climbed to their strongest level in more than four years, according to a private survey.
The S&P Global flash Japan Manufacturing Purchasing Managers’ Index (PMI) rose to 54.9 in June from 54.5 in May, moving closer to April’s 55.1 reading, which marked the strongest expansion since January 2022. Any figure above 50 signals expansion.
A key driver of the improvement was a surge in new orders, which accelerated at the fastest pace in over four years. Survey respondents linked the increase partly to stockpiling activity as customers looked to guard against potential supply disruptions and higher prices tied to ongoing geopolitical tensions, including the conflict involving Iran.
Factory output also increased at a slightly quicker rate, while employment in the sector expanded at the fastest pace in more than eight years, suggesting firms remain confident about near-term demand conditions.
Cost pressures, however, continued to linger. Input and output inflation eased slightly but stayed close to their highest levels since late 2022, with rising energy, fuel and raw material costs influenced by developments in the Middle East.
Export demand showed a more mixed picture, with growth in new export orders easing compared with May, when it had recorded its strongest pace in five years.
Elsewhere, the services sector returned to expansion after stalling in May. The flash services PMI rose to 51.8 from 50.0, supported by improving domestic demand even as foreign demand weakened further. The composite PMI, which combines manufacturing and services, climbed to 52.5 from 51.1.
Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said, “Overall business activity growth across Japan picked up for the first time since the outbreak of war in the Middle East … while this suggests a strong Q2 performance overall, it is important to note that the current period of growth is partly being driven by stock-piling efforts amid the war in the Middle East, and these efforts are likely to fade in the months ahead.”
Reuters
