Japan's factory activity fellin November at its fastest pace in eight months due to soft demand, prompting firms to reduce production.
Manufacturing PMI:
- The final au Jibun Bank Japan manufacturing PMI fell to 49.0 in November, the lowest since March, down from 49.2 in October.
- The index stayed below the 50.0 threshold (indicating contraction) for the fifth consecutive month.
- The subindex for new orders continued contracting but at a moderate pace compared to October.
- It has remained below the 50 break-even mark for 1.5 years, reflecting sustained weak demand.
- Exports: New export orders declined for the 33rd consecutive month, highlighting subdued demand both domestically and overseas.
Other details showed:
Weak Demand Impact:
- Firms reduced output due to weak demand, especially in the semiconductor and automotive sectors.
- Output fell at its fastest pace since April.
- Employment shrank for the first time in nine months.
Input Costs and Pricing:
- Input cost pressures remained strong, driven by higher prices for labor, logistics, and raw materials, particularly from abroad.
- Output price inflation reached its highest level since July, as firms raised selling prices to protect margins.
Inflation Data:
- Core consumer inflation in Tokyo accelerated in November, staying above the Bank of Japan’s 2% target.
- This sustained market expectations for a near-term interest rate hike.
Business Outlook:
- Despite weak demand, manufacturers remained positive about their outlook, with confidence reaching a three-month high.
- Optimism was supported by hopes for new product launches and a broad economic recovery.
