TOKYO (Reuters) – Japan’s manufacturing activity sped up in March from the prior month as a reduction in COVID-19 cases in the country helped lift orders and production, however, surging input prices and Russia’s war in Ukraine clouded the outlook.
Activity in the services sector, which has been battered by the pandemic, contracted for the third straight month, but the pace of decline slowed.
The au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) rose to a seasonally adjusted 53.2 in March from a final 52.7 in the previous month. A reading below 50 indicates contraction from the previous month, above 50 expansion.
The survey showed output rebounded from a contraction in the previous month, while activity in new orders posted an expansion, albeit at its slowest rate in six months.
The conflict in Ukraine and soaring oil and raw material prices hurt momentum for the world’s third-largest economy, even as it saw new coronavirus infections caused by the Omicron variant slow.
“Firms across the Japanese private sector reported a further intensification of price pressures,” said Usamah Bhatti, economist at IHS Markit, which compiles the survey.
“Input prices rose at the fastest pace since August 2008 with businesses attributing the rise to surging raw material prices, notably energy, oil and semiconductors amid deteriorating supplier performance.”
The au Jibun Bank Flash Services PMI Index rose to a seasonally adjusted 48.7 from February’s final 44.2 to mark the third straight month of contraction.
The au Jibun Bank Flash Japan Composite PMI, which is calculated by using both manufacturing and services, also shrank for a third straight month, rising to 49.3 from last month’s final of 45.8.
Japanese firms reported softer optimism for the 12 months ahead in March, Bhatti said.
“Positive sentiment was the weakest for 14 months amid concerns regarding the economic impact of the Russia-Ukraine conflict.”
(Reporting by Daniel Leussink; Editing by Sam Holmes)