TOKYO (Reuters) – Japan’s factory activity contracted at a slower pace in December as output and new orders fell, a private sector survey showed on Monday, edging closer to stabilizing after recent declines.
Jibun Bank Japan’s final manufacturing purchasing managers’ index (PMI) rose to 49.6 in December, indicating the mildest decline in three months. The index was slightly higher than 49.5 in the flash reading and 49.0 in November, but remained below the 50.0 threshold that separates growth from contraction for a sixth straight month.
“The headline reading edged closer to neutral amid softer output cuts and new orders,” said Usamah Bhatti of S&P Global Market Intelligence, which compiled the survey.
The production sub-index decreased for the fourth month in a row in December, but the decrease was also slower than last month. Manufacturers noted that reduced new orders were the main factor behind the decline in production.
New orders fell for the 19th consecutive month due to weak demand in domestic and key foreign markets. Some companies in the survey suggested that the semiconductor market was behind the weakness in new orders.
Employment increased in December, reversing a decline in November, to reach the highest level since April. Companies in the survey said they hired more workers because of labor shortages, as well as in preparation for future demand.
Input prices rose at their strongest pace since August, with companies citing higher raw material and labor costs as the reason. A weak yen has also fueled inflation. To cope with rising prices, companies raised their output prices at the fastest rate in five months.
Manufacturers remained confident about their outlook as they expect business to expand thanks to the launch and mass production of new products.
