Japan Dec factory activity posts sharpest fall in more than 2 years -PMI By Reuters

TOKYO (Reuters) – Japanese factory activity fell in December at the sharpest pace in 26 months, a business survey showed on Wednesday, with companies seeing further declines amid a global economic slowdown.

The au Jibun Bank Japan manufacturing purchasing managers’ index edged down to a seasonally adjusted 48.9 in December from November’s final 49.0.

Although slightly higher than the flash figure of 48.8, the reading was the weakest since October 2020 and marked the second month below the 50-line that separates contraction from expansion.

“The downturn was largely centred around the current demand environment which is weak both internationally and domestically,” said Laura Denman, economist at S&P Global (NYSE:) Market Intelligence, which compiles the survey.

Output and new orders extended their contraction for a sixth month in December, yet at slower paces than last month, the survey’s subindexes showed.

While the survey showed input price inflation was cooling to a 15-month low, indicating easing cost pressures, the rest of the results pointed to darker prospects for Japan Inc in early 2023.

Manufacturers were expecting a further downturn in their business conditions, with the subindex of future output hitting the lowest since May, when China’s COVID-19 lockdowns disrupted the supply chains for Japanese companies.

“Forward looking indicators are increasingly painting a gloomier picture for Japan’s manufacturing sector in the future,” Denman said.

The survey corroborates the weak factory output data released last week that showed contraction for a third month in November.

Analysts expect Japan’s production to remain subdued for the coming months due to falling overseas demand, with the coronavirus situation in China posing a further downside risk.