Japan’s Manufacturing Sector Contracts at Slowest Pace in Five Months During July

Factory activity across Japan remained in contraction for the fifth consecutive month, but on a positive note, the pace of contraction touched the lowest level over the period – an encouraging sign that indicates that the worst impact of the pandemic has possibly bottomed out. The final au Jibun Bank Flash Manufacturing PMI climbed to a seasonally adjusted reading of 45.2 for the month of July from the previous month’s reading of 40.1.

The final reading came in better than the prelim reading for July, which stood at 42.6. The improvement in the PMI figure was driven by the least level of contraction in five months for total output and new orders received. This has raised hopes that the manufacturing sector could soon work its way back towards rebounding, even though the threat of a second wave of coronavirus looms globally.

In an even more promising sign, future output grew at the fastest rate seen since six months during July. In addition, around one third of the manufacturers that participated in the survey expected production to climb higher over the coming 12 months.

According to Director at IHS Markit, Tim Moore, The headline PMI recovered some of the ground lost in the second quarter. Manufacturers… cited a boost from easing emergency measures at home, alongside signs of recovery across the automotive supply chain and the restart of economic activity in key export destinations.”