Japan’s factory activity growth slowed further to a 21-month low in October as relentless cost pressures torment manufacturers, but service-sector firms received a boost as the country reopened to foreign tourists.
The au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) eased to a seasonally adjusted 50.7 in October, down from the prior month’s final 50.8.
The headline figure marked the seventh month of weaker growth and the slowest expansion since January 2021, although it stayed above the 50-mark that separates contraction from expansion on a monthly basis.
Factory output looked set to contract for the fourth month running as new domestic and export orders continued to shrink.
The manufacturing sector struggled in the face of weak demand and severe cost pressures, said Laura Denham, economist at S&P Global Market Intelligence, which compiles the survey.
“The rate of output price inflation rose to a fresh survey peak in October as firms continued to share increasing cost burdens with their clients,” Denham said.
Japan’s wholesale prices rose 9.7% in September from a year earlier, while the rate of core consumer inflation stood at 3.0% in the month.
“With inflationary pressures remaining elevated across the private sector, business confidence dipped to a six-month low,” Denham said.
Growth in the services sector picked up, however.
The au Jibun Bank Flash Services PMI Index expanded for a second month, rising to a seasonally adjusted 53.0 in October after September’s 52.2 final, according to the survey.
Earlier this month, Japan reopened its borders to individual foreign tourists after more than two years of pandemic isolation.
The au Jibun Bank Flash Japan Composite PMI, which is estimated by using both manufacturing and services, also accelerated, rising to 51.7 from the prior month’s final 51.0, it showed.