Japanese Manufacturing Activity Declines

Japanese manufacturing activity shrank significantly in January, marking a seventh consecutive month of contraction, according to preliminary purchasing managers index (PMI) data released on Friday. Meanwhile, the services sector showed improvement.

The au Jibun Bank manufacturing PMI dropped to 48.8 in January from 49.6 in December, falling short of the forecast of 49.7. A PMI reading below 50 indicates a contraction, and this marks the seventh month of decline in manufacturing.

The report highlighted that business conditions in Japanese manufacturing worsened to their largest extent in ten months. Production levels experienced a slight decrease, at the fastest rate since last April, and new orders declined at the quickest pace in six months.

> “Manufacturing new orders fell at the most marked rate since last July. At the same time, outstanding business levels decreased for the second consecutive month as both manufacturing and services saw diminishing backlogs, indicating that the recent uplift in activity partly stems from the completion of existing orders,” said Usamah Bhatti, economist at S&P Global Market Intelligence, which compiled the survey.

In contrast, the au Jibun Bank services PMI rose sharply to 52.7 in January from 50.9, driven by a stronger increase in new business. As a result, Japanese service providers have increased employment levels, although confidence remain similar to the levels observed at the end of the previous year.

Additionally, the au Jibun Bank flash Japan composite PMI, which accounts for both manufacturing and services, increased to 51.1 in January from 50.5 in the previous month.