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Japanese Manufacturers' Confidence Recovers Slightly in May But Could Sour in August, Reuters Tankan Survey Shows

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Japanese Manufacturers' Confidence Recovers Slightly in May But Could Sour in August, Reuters Tankan Survey Shows

Japanese manufacturers' confidence recovered slightly in May following a drop in commodities due to the impact of the war in Iran, according to the Reuters Tankan survey.

Sentiment grew to plus 8 in May from plus 7 in April, according to the poll, which is an indicator of the quarterly Bank of Japan's Tankan business survey.

The indicator was still way below the plus 18 reading in March, which grew to a four-year high on a boost in the chemicals, petroleum and semiconductor sectors.

The index for the materials industries recovered to a reading of plus 5 in May from minus 3 in April, according to Reuters.

Chemicals swung to a plus 6 reading from minus 8, while the steel and nonferrous materials sector returned to zero from minus 25.

"Front-loaded demand due to the Middle East situation" helped boost manufacturers' bullish view, the report said, citing a chemicals company manager.

Overall factory sentiment rebound stayed lukewarm, with transport machinery falling by half to plus 10 in May from plus 20 in April, which one survey respondent attributed to the closure of the Strait of Hormuz.

Food processors' optimism plunged to a six-year low of minus 40 from minus 25, while the textiles, paper, and pulp index declined to minus 22 from zero.

Manufacturers' forecast sentiment to sour further. The index is seen to fall to plus 5 in August due to an uncertain outlook on the Iran war and its supply chain impact, Reuters said.

Non-manufacturers' sentiment decreased to plus 29 in May from plus 31 in the previous month amid a drop in real estate and construction, as well as in general services.

Reuters conducted the poll from May 1 to 15, covering 492 major non-financial companies, with 220 responding anonymously.

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