Japan’s PMI data for December presents a mixed picture of the country’s economic The PMI Manufacturing index fell to 47.7 from 48.3, underperforming the market expectation of 48.2 and indicating contraction in the sector. In contrast, PMI Services index rose from 50.8 to 52.0. Consequently, PMI Composite index, moved back into expansion territory, rising from 49.6 to 50.4.
Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, noted, “The December PMI surveys indicate that Japan’s private sector experienced a renewed, albeit mild increase in overall business activity as the year came to a close.”
Fiddes further elaborated, “The overall performance of the private sector remained subdued.” This is evident in the composite new business, which declined for the second consecutive month. Although there was modest sales growth in the service sector, it was not sufficient to offset the sharp and accelerated drop in manufacturing orders.
Another critical aspect highlighted in the PMI report is the resurgence of inflationary pressures. Fiddes noted, “The latest survey also indicated a renewed pick up in inflationary pressures amid reports that a weaker exchange rate and higher labor and raw material costs had pushed up expenses.” As a result, the prices charged by Japanese firms increased at the fastest pace since August.