Japan's factory activity picks up in March on growing output, orders – flash PMI

TOKYO (Reuters) – An expansion of Japan’s factory activity gathered pace in March, a private sector survey showed on Wednesday, helped by the prospect of a global economic recovery as an increasing number of countries roll out COVID-19 vaccines.

FILE PHOTO: An employee works at a beer production line at Japanese brewer Kirin Holdings’ factory in Toride, Ibaraki Prefecture, Japan July 14, 2017. REUTERS/Kim Kyung-Hoon

But the service sector remained much more gloomy, with businesses suffering from the coronavirus pandemic’s fallout even after the government lifted a state of emergency in the Tokyo region.

The au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) rose to a seasonally adjusted 52.0 in March from a final 51.4 in February.

That meant manufacturing activity came in above the 50.0 threshold that separates contraction from expansion for the second straight month.

The PMI survey showed that activity was helped by growing output and new orders. Future output, which shows firms’ growth expectations for the year ahead, also remained strongly positive.

“Positive sentiment stemmed from the expectation that the lifting of state of emergency measures and broader restrictions as vaccinations roll out would trigger a recovery in demand in both domestic and external markets,” said Usamah Bhatti, economist at IHS Markit, which compiles the survey.

But the survey highlighted pressure on firms from higher input prices, which had already risen sharply in the previous month.

Manufacturers reported input prices were at their highest since November 2018, leading to the widest gap between input and output prices since December 2014.

Despite the expanding output and orders, manufacturers were hesitant to take on workers, reporting the third straight month of job shedding.

The PMI survey also showed the service sector remained pessimistic as fallout of the health crisis persisted, the survey showed.

The au Jibun Bank Flash Services PMI index was in line with the previous month’s reading, rising to 46.5 on a seasonally adjusted basis from February’s final of 46.3.

The au Jibun Bank Flash Japan Composite PMI, which is calculated using both manufacturing and services, stood at 48.3 in March, largely unchanged from the previous month’s final of 48.2.

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