A business survey revealed that Japan’s factory activity experienced a slight contraction in July, marked by declines in output and new orders, with firms facing continued pricing pressures. However, an expansion in the service sector contributed to an overall return to growth in Japan’s private sector for the same month.
The au Jibun Bank flash Japan manufacturing purchasing managers’ index (PMI) dipped to 49.2 in July from 50.0 in June, dropping below the 50.0 threshold that distinguishes growth from contraction on a monthly basis for the first time in three months.
The survey highlighted that output in the manufacturing sector contracted slightly in July, reversing its expansion trend from June, while new orders declined to the lowest level since February. Manufacturers faced increasing input cost inflation, reaching the highest level since April 2023, although output prices decreased to a four-month low.
Wholesale inflation in Japan picked up in the recent month due to the decrease in the yen, leading to an increase in the expenses related to importing raw materials.
Conversely, the service sector witnessed a rebound in July, showing significant growth in new business. The au Jibun Bank flash services PMI surged to 53.9 in July, marking a three-month high and a sharp improvement from the 49.4 recorded in June.
Combining both manufacturing and service sector activities, the au Jibun Bank flash Japan composite PMI climbed to 52.6 in July from 49.7 in June.
