TOKYO, Nov 24 – Japan’s manufacturing activity contracted at the fastest pace in two years in November as demand worsened on strong inflation pressures, a business survey showed on Thursday.
The contraction in factory activity also marked the first monthly drop in 22 months and has raised questions about Japan’s economic prospects, as the country relies heavily on trade with China and other nations for its growth.
The au Jibun Bank Flash Japan Purchasing Managers’ Index (PMI) for the manufacturing sector fell to 49.4 points seasonally adjusted in November from a final reading of 50.7 in the previous month.
That meant activity posted the steepest contraction since a reading of 49.0 in November 2020, falling for the first time since January last year below the 50 mark, which separates contraction from expansion.
“Reportedly, cooling demand conditions and acute inflationary pressures continued to hamper production and new orders,” said Laura Denman, an economist at S&P Global Market Intelligence, which compiles the survey.
“Manufacturing companies also appear to be increasingly concerned about their future, as indicated by a drop in business confidence that took the index to its lowest level since May.”
Output shrank at the fastest pace in 26 months, falling for the fifth month in a row, the survey results showed.