Japan’s Economy on Shaky Ground: Factory Activity Contracts for Sixth Consecutive Month

Weak demand persists, causing Japan's factory activity to shrink for 6th consecutive month - PMI

Japan’s factory activity shrinks for 6th month due to weak demand, according to the PMI.

Hold on to your pocket calculators, folks! The latest report from au Jibun Bank reveals that Japan’s factory activity has continued to shrink for the sixth month in a row. It’s like watching a magician struggle to pull a rabbit out of a hat – you keep hoping for a miracle, but the bunny just won’t appear.

According to the flash Japan manufacturing purchasing managers’ index (PMI), Japan’s factory activity slipped to 48.1 in November, down from 48.7 in October. Now, for those of you unfamiliar with PMI, let me break it down: any number below 50.0 is bad news, indicating contraction. And boy, has Japan been stuck in contraction mode since June!

But that’s not all, folks. Not only are orders dwindling, but they’re falling faster than an acrobat off a tightrope. Both output and new orders saw a further decline in November, with incoming business hit hardest. It’s like a never-ending game of dominoes, with each piece toppling over and dragging the economy down.

And if you thought things couldn’t get any worse, think again! Manufacturers are cutting their workforce faster than a chef chopping vegetables. Yes, you heard that right. Staffing has decreased for a second straight month. It’s as if the labor force is performing a disappearing act – each employee vanishing one by one.

Usamah Bhatti, an ANBLE at S&P Global Market Intelligence, summarized the situation perfectly. He said, “Activity at Japanese private sector firms stagnated midway through the fourth quarter of 2023.” Stagnation is the name of the game, folks. Demand conditions remained as quiet as a mouse, with November looking just as lackluster as October.

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But wait, there’s more! Although input price inflation has eased to a 27-month low, it’s still higher than your average roller coaster. Rising costs of raw materials, fuel, and labor, combined with a weak yen, are the major culprits behind these persistent price hikes. It’s like trying to keep a helium balloon from floating away – no matter how hard you try, it keeps creeping higher.

On the bright side (if we can call it that), the service sector managed to eke out a modest expansion. The flash services PMI stood at 51.7 in November, just a small change from the 51.6 registered in October. It may not be a victory march, but at least it’s better than falling off a cliff!

Despite the gloomy numbers, firms are surprisingly optimistic about the future. They remain confident in the business activity outlook for the next year. Picture it like the sun peeking through dark clouds – a faint glimmer of hope in an otherwise bleak landscape.

All in all, the au Jibun Bank Flash Japan composite PMI, which combines both manufacturing and service sector activity, stood at 50.0 in November. While this puts us on the cusp of expansion or contraction, it’s clear that the Japanese economy is walking a tightrope, one gust of wind away from tumbling over.

Remember, folks, the economic world is full of surprises. Just when you least expect it, a twist of fate can turn things around. So keep your calculators handy and your fingers crossed. Let’s hope for a miraculous recovery and a prosperous future.

Original content sourced from here.

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