Japan’s Factory Activity Expands for 1st Time in 7 Months

REUTERS/Kim Kyung-Hoon
Chimneys and cranes are seen at an industrial area in Yokohama on Jan. 16, 2017.

TOKYO – Japan’s factory activity expanded in May for the first time in seven months thanks to increases in output and new orders and buoyed by a positive outlook for the year ahead, a private sector survey showed on Thursday.

The final au Jibun Bank Japan manufacturing purchasing managers’ index stood at 50.6, its first reading above the 50.0 threshold since October last year and marking the fastest rate of expansion in a year.

Output and new orders hit their highest in 12 and 13 months, respectively, as business and consumer confidence lifted demand.

“The rebound in total new orders was achieved against a backdrop of customer destocking as global supply chains normalize and less cautious inventory strategies take hold,” said Tim Moore, economics director at S&P Global Market Intelligence, which compiled the survey.

At the same time, some firms in the survey said overstocked clients and lower export sales, especially toward China, dented growth in new orders.

The final PMI reading comes after government data on Wednesday showed Japanese factory output unexpectedly fell in April. While a survey of manufacturers forecast a 1.9% increase in May, an industry ministry official said weak overseas demand heighten the risk of a downward adjustment in their plans.

Japan has so far withstood the impact of deteriorating global economic conditions thanks to a recovery in services sector activity, but signs of a slowdown in U.S., European and Chinese growth cloud the outlook for the export-reliant economy.

Average suppliers’ delivery delays improved for the first time since January 2020 with shorter lead times for electronic components.

The overall rise in input prices was the weakest in over two years. Employment growth was the slowest in the ongoing 26 months of expansion, according to the survey.