Japan’s June factory activity extends declines for 14th month: PMI

By Reuters On Jul 1, 2020

FILE PHOTO: Employees wearing protective face masks and face guards work on the automobile assembly line as the maker ramps up car production with new security and health measures as a step to resume full operations, during the outbreak of the coronavirus disease (COVID-19), at the Kawasaki factory of Mitsubishi Fuso Truck and Bus Corp., owned by Germany-based Daimler AG, in Kawasaki, south of Tokyo, Japan May 18, 2020. REUTERS/Issei Kato

TOKYO (Reuters) – Japan’s factory activity shrank for a 14th straight month in June on sharp reductions in output and new orders, pointing to a heavy hit to demand from the coronavirus pandemic, a business survey showed on Wednesday.

Many export-reliant nations such as Japan are feeling the pain from a global trade contraction triggered by the pandemic, after government-imposed lockdowns disrupted supply chains and made consumers stay at home.

The final au Jibun Bank Japan Manufacturing Purchasing Managers’ Index (PMI) rose to a seasonally adjusted 40.1 from 38.4 in May and a preliminary 37.8 released last week.

“The chance of a V-shape recovery in the manufacturing sector appears slim at this stage,” said Joe Hayes, economist at IHS Markit, which compiles the survey.

“We’re still awaiting signs of meaningful improvement in Japan’s manufacturing sector, with the PMI for June failing to stage a substantial recovery.”

The headline index stayed below the 50.0 threshold that separates contraction from expansion for a 14th month – the longest such stretch since a 16-month run through June 2009.

Manufacturers struggled with fragile demand capacity, keeping output, new orders and purchasing activity deeply into contraction territory, the survey showed.

Backlogs of work fell at a rate close to the previous month’s over-a-decade record, while employment levels declined at a faster pace.

On a more positive note, the future output subindex moved into positive territory for the first time since February on expectations of a gradual economic recovery, IHS Markit said.