Manufacturing Slows: Japanese Businesses Shrink in November PMI By | So Good News


© Reuters.

By Ambar Warrick–Japanese business slumps in November; high inflation; Data showed on Thursday that domestic manufacturers’ services sector was on the verge of contraction due to a weaker yen and weaker overseas demand.

au Jibun Bank’s flash composite output purchasing managers index (PMI) fell to 48.9 in November from 51.8 last month, contracting for the first time in three months.

The weak reading was largely due to Japan’s unexpected drop to 49.4, its first contraction since January 2021. Analysts expect a reading above 50.9, indicating expansion above the 50 level.

Japan’s services sector activity fell to 50.0 in November from 53.2 in the previous month, indicating activity remained steady in November.

It comes at a time when Japanese companies are struggling with rising raw material and production costs due to rising inflation in the country. Data showed last month that it rose to a 40-year high in October as a weaker yen pushed up the cost of importing goods.

“Central to the recent downturn has been poor performance in Japanese manufacturing. Freezing demand conditions and strong inflationary pressures continue to inhibit output and new orders, said Laura Denman, Economist at S&P Global (NYSE: ) Market Intelligence.

“Manufacturing companies appear to be more cautious about their futures, as indicated by the economic slowdown that put the index at its lowest level since May.”

New businesses rose for a third straight month, but the service sector held back as some parts of the economy benefited from a resurgent tourism and the lifting of COVID-related restrictions.

However, input prices appear to have eased slightly from historic highs, and the outlook for future output remains in positive territory.

It showed little reaction to the data, trading up 0.3% at around 139, benefiting from a weaker dollar.

It unexpectedly fell in the third quarter as domestic businesses and consumers struggled to cope with rising price pressures. Much of this pressure comes from a reluctance to tighten monetary policy. The better part of a decade has come with keeping interest rates extremely low.


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