Business activity growth in Japan rose to its highest level in eight months in April with the services sector remaining the primary driver for growth. Japan’s manufacturing sector also posted improvements in April as deterioration further eased. S&P Global’s au Jibun Bank flash Japan composite Purchasing Managers’ Index (PMI), which includes both manufacturing and service sector activity, increased to 52.6 in April, from 51.7 in March, marking the highest levels since August 2023.
Manufacturing activity recovers
Japan’s business activity in the manufacturing sector exhibited signs of improvement in April, approaching the break-even point after a long period of sluggishness. According to the PMI, manufacturing activity rose to 49.9 in April from 48.2 in March, marking the closest the index has been to the break-even level since slipping into contraction in June. Although remaining below the 50.0 threshold for 11 consecutive months, the data suggests a gradual pickup in the key manufacturing sector.
“While the service sector remained the primary driver of growth, it was encouraging to see the deterioration in manufacturing output further ease in April,” said Jingyi Pan, economics associate director at S&P Global Market Intelligence.
Both output and new orders declined at the slowest pace in six and 10 months, respectively. Therefore, Japan’s manufacturing sector confidence improved and employment accelerated. However, input cost inflation saw an increase in April, which led average charges to rise at their fastest pace in nine months.
Read: Japan’s March core inflation slows to 2.6 percent despite yen weakness
Service sector expansion accelerates
In addition to the positive developments in Japan’s manufacturing sector, the service sector’s activity expansion accelerated in April. The au Jibun Bank Flash Japan Services Business Activity Index edged up to 54.6, from 54.1 in March, the highest since May last year.
Faster new business inflows, which reached a 10-month high, propelled Japan’s business activity growth during April. Moreover, the continuous pressure on capacity led to an increase in employment. However, input cost inflation rose for the second month in a row, leading to the strongest increase in selling prices in 10 years.
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