Japan PMI Composite Falls to Four-Month Low, Out Prices Hit Record

Japan’s private sector growth softened in April despite a sharp surge in manufacturing activity. PMI Composite slipped from 53.0 to 52.4, marking a four-month low, as weakness in services offset strong gains in the factory sector.

Manufacturing was the clear standout. PMI Manufacturing jumped from 51.6 to 54.9, while output rose from 52.1 to 55.4, the strongest pace in over a decade. Firms reported a solid pickup in new orders, with some boosting production preemptively amid concerns over supply chain disruptions linked to the Middle East conflict.

In contrast, services lost momentum, with PMI falling from 53.4 to 51.2. Slower growth in activity and sales points to softening domestic demand, creating a divergence between external-facing manufacturing strength and more fragile services conditions.

At the same time, inflation pressures are building rapidly. Input costs rose at the fastest pace since January 2023, driven by higher fuel, energy, and raw material prices, alongside a weaker Yen. Firms passed on these costs aggressively, with output prices rising at the fastest rate on record. Despite the manufacturing strength, business confidence dropped to its lowest since August 2020, highlighting concerns that current momentum may prove unsustainable.

Full Japan PMI flash release here.