Japan's Private Sector Growth Hits Three-Month High in June
Japan's private sector activity expanded at the fastest pace in three months in June, supported by stronger manufacturing output and a renewed increase in services activity, according to preliminary survey data released by S&P Global on Tuesday.The flash Japan Composite Output Index rose to 52.5 in June from 51.1 in May, marking the 15th consecutive month of expansion and the strongest growth since March. A reading above 50 indicates expansion.The flash Services PMI Business Activity Index climbed to 51.8 from 50.0, while the Manufacturing PMI edged up to 54.9 from 54.5.Manufacturing output also improved, with the output index rising to 54.3 from 54.0.New business across the private sector increased at the fastest pace in four months, driven by stronger demand in both manufacturing and services.Manufacturers recorded the fastest rise in sales since January 2022, partly reflecting customers' stock-building amid supply chain disruptions and concerns about future price increases linked to the conflict in the Middle East.Input cost inflation accelerated for the fifth consecutive month, reaching its highest level since July 2022. Companies cited higher energy, fuel, and raw material costs associated with the conflict in the Middle East, prompting another substantial increase in selling prices."The June flash PMI data indicated that overall business activity growth across Japan picked up for the first time since the outbreak of war in the Middle East," Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said."The expansion in output continued to be led by manufacturers, which recorded one of the strongest rises in output in over a decade. Nevertheless, it was also encouraging to see a renewed upturn in service sector activity after a temporary stagnation in May," she added.Fiddes cautioned that part of the current growth was being supported by inventory stockpiling, which could fade in the coming months as warehouses fill and higher costs weigh on demand.Business confidence weakened from May and remained below historical averages, with firms citing inflation, supply chain disruptions linked to the Middle East conflict, and persistent labor shortages as key concerns for the year ahead.The survey comes as the Bank of Japan raised its policy rate to 1.0% last week, the highest level since 1995, as policymakers sought to contain inflationary pressures stemming from higher energy costs and supply disruptions.Japan's key inflation gauge held steady in May, helped in part by government subsidies that kept energy costs in check.Core consumer prices excluding fresh food rose 1.4% from a year earlier, matching economists' expectations and marking the lowest reading since 2022, while keeping the BOJ on track for another interest-rate hike later this year.
