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Financial News: Japan Manufacturing Contracts Most Since 2016

Japan Manufacturing Contracts Most Since 2016

03/01/2020 - 22:05:00 (RTTNews)

(RTTNews) - Japan manufacturing sector contracted at the fastest pace since 2016 as production volumes were adversely affected by delayed input deliveries and reduced demand in February, survey data from IHS Markit showed Monday.

The Jibun Bank manufacturing Purchasing Managers' Index fell to 47.8 in February from 48.8 in January, its lowest level since May 2016.

The impact of COVID-19 was most apparent in new order intakes. New orders placed with Japanese goods producers fell at the sharpest rate since December 2012.

The combined impact of lower sales and input delivery delays contributed to a further decrease in production volumes in February.

However, manufacturers still expect output to be higher in 12 months' time. That said, the degree of optimism eased from January's 18-month high.

Meanwhile, employment increased as additional workers were recruited to offset retirements and voluntary resignations.

On price front, the survey showed that output prices were cut in a bid by firms to boost competitiveness. The scope for price discounting was helped by input cost inflation easing to a 39-month low.

Joe Hayes, an economist at IHS Markit, said overall order books fell at the sharpest rate in over seven years.

"This certainly cannot be wholly attributed to the COVID-19 outbreak, so it appears that Japan's manufacturing recession goes much deeper, but lower sales in China during the month add further woes to an already-fragile external environment," Hayes added.

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