- The final au Jibun Bank Japan manufacturing purchasing managers’ index (PMI) experienced a slight increase from 47.9 in December to 48.0 in January.
- Despite the increase, the PMI remains below the 50.0 threshold, indicating continued contraction in the sector since June.
- Deteriorating conditions both domestically and globally are putting a strain on the sector.
- Manufacturers are feeling the pressure of heightened costs due to higher prices of raw materials, labour, and fuel.
- The sector saw further declines in output and new orders for the eighth consecutive month, albeit at a slightly reduced pace.
PMI Below Growth Threshold
The final figure for January’s au Jibun Bank Japan manufacturing purchasing managers’ index (PMI) indicated an increase to 48.0 from December’s 47.9. Nevertheless, it continues to sit below the growth threshold of 50.0, indicating contraction in the sector – a state it has remained in since June of the previous year.
Usamah Bhatti from S&P Global Market Intelligence noted that the struggling domestic and international economic conditions had been straining the sector considerably.
Persistent Slump in Output and New Orders
The PMI’s two primary sub-indexes, output and new orders, saw continued decline for the eighth month, although the rate of decline showed some signs of slowing down.
Concerns Over Future Manufacturing Activities
There were persistent concerns over future manufacturing activities. This was illustrated by the most significant decrease in outstanding business since August 2020. Moreover, Bhatti highlighted the added pressure Japanese manufacturers have struggled with due to rising prices and increasing supply issues.
Pressures and Disruptions
In addition to the above challenges, manufacturers reported increasing cost pressures owing to the rising prices of essential inputs such as raw materials, labour, and fuel. Certain firms highlighted the disruptive impact caused by a crisis in the Red Sea on their supply chain.
Impact on Employment and Stock
The challenges faced by the industry had a toll on employment and stocks of purchases, which consequently pulled down the headline index further.
New Order Contraction
Finally, an absence of incoming business led to a severe decline in outstanding work, which was recorded as the steepest in over three years. However, manufacturers managed to retain a level optimism, hoping for an uptick in demand from markets like semiconductors, despite a slight dip from December’s confidence level.
All these factors and their ongoing impact on Japanese manufacturers could potentially influence trading and foreign exchange related to assets in this sector. Investors should consider these details while dealing with such assets.