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Japan's June factory activity posts slowest growth in 4 months, costs rise - PMI

·2-min read
Worker walks near a factory at the Keihin industrial zone in Kawasaki

TOKYO (Reuters) - Japan's factory activity expanded at the slowest pace in four months in June, as momentum among manufacturers eased from the previous month when output took a big hit from global shortage of high-tech chips.

The slower expansion of manufacturing activity comes as firms face pressure from higher input costs and a sharp recovery in other major global economies pushes up raw material prices.

The final au Jibun Bank Japan Manufacturing Purchasing Managers' Index (PMI) in June slipped to 52.4 on a seasonally adjusted basis from 53.0 in the previous month, coming in at its lowest since February.

"The rate of growth eased from May amid softer expansions in both production and new orders," said Usamah Bhatti, economist at IHS Markit, which compiles the survey.

"Manufacturers continued to note concern regarding ongoing supply chain disruption, which has induced sharp rises in the price of raw materials amid severe shortages."

The final reading, however, marked an improvement from a 51.5 flash reading released last week, underscoring resilience in manufacturing activity in the face of any impact of the chip shortage for now.

Manufacturers' optimism for the year ahead reached a record high, suggesting companies were hopeful conditions will improve over the long term, the PMI survey showed.

But output and overall new orders expanded at a softer pace in June, with firms reporting drags from health crisis-related restrictions in addition to the chip shortage.

Japan's industrial output posted the biggest monthly drop in a year in May, official data on Wednesday showed, as the semiconductor supply issue heavily impacted car manufacturing.

The PMI survey showed input prices rose for a 13th straight month due to rises in raw material prices, such as chips and metals.

"Cost burdens faced by businesses rose at the sharpest pace since March 2011, which has partially translated to higher charges for clients to cover margins," Bhatti said.

(Reporting by Daniel Leussink; Editing by Sam Holmes)

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