Japan’s latest PMI data for June presents a mixed economic outlook. Manufacturing PMI slipped slightly from 50.4 to 50.1, falling short of expectations of 50.6. However, manufacturing output showed a positive shift, rising from 49.9 to 50.5, marking the first expansion in over a year. Conversely, Services PMI dropped sharply from 53.8 to 49.8, indicating fractional contraction for the first time since August 2022. As a result, Composite PMI fell from 52.6 to 50.0.
Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, commented that the private sector expansion has stalled midway through the year. The return of manufacturing output growth was overshadowed by a decline in services activity, partially due to labor constraints.
A notable concern is the “pressure on margins,” with average input costs rising at the fastest pace in over a year while output price inflation softened, particularly in the service sector. Anecdotal evidence pointed to the weak yen and increasing labor costs as significant factors driving up cost inflation.
