Japan factory activity expands for first time in 22 months

TOKYO (REUTERS) – Japan’s factory activity expanded for the first time in 22 months in February, a private-sector survey showed on Friday (Feb 19), as strong export demand helped manufacturers shake off the drag from the coronavirus pandemic.

But the service sector was more pessimistic, with businesses struggling to overcome the blow from emergency measures taken to contain the Covid-19 crisis.

The au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) improved to 50.6 from a final 49.8 in January.

For the first time since April 2019, the headline index rose above the 50.0 threshold that separates from expansion, helped by stronger output and an increase in new orders at home and especially abroad. The reading was also the highest since December 2018, though growth was modest.

“Businesses were optimistic that business conditions would improve in the coming 12 months,” said Usamah Bhatti, economist at IHS Markit, which compiles the survey.

“Nonetheless, disruption caused by the pandemic is likely to remain in the immediate future.”

The survey showed manufacturers’ new export orders grew at their fastest pace since early 2018, returning to expansion for the first time in four moths.

That supported gross domestic product and trade data released this week that showed Japan’s economy has been reaping benefits from overseas demand, in part because of a huge global need for chip-making equipment.

But the PMI survey also showed activity in the service sector, which includes the consumer sector, deteriorated at a faster pace, hurt by the anti-coronavirus emergency measures.

Although daily coronavirus cases have been in decline in recent weeks after peaking in early January, Tokyo and nine other prefectures are still under a state of emergency to stop a resurgence.

The au Jibun Bank Flash Services PMI index fell to a six-month low of 45.8 on a seasonally adjusted basis from January’s final of 46.1.

The au Jibun Bank Flash Japan Composite PMI remained in contraction despite the improvement in manufacturing activity.

The index, which is calculated using both manufacturing and services, stood at 47.6 in February compared to the previous month’s final of 47.1.

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