Japan’s March factory activity grows at faster pace on demand recovery: PMI

FILE PHOTO: An engineer makes an arm rail for residential buildings inside a metal processing factory at an industrial zone in downtown Tokyo, Japan, March 22, 2016. REUTERS/Yuya Shino

TOKYO (Reuters) - Japan’s factory activity expanded at a faster pace in March, as an uptick in orders pushed up output levels, with firms seeing demand recover further from the pain of the coronavirus pandemic at home and abroad.

The private-sector survey likely offers some relief to Prime Minister Yoshihide Suga’s government, as policymakers face pressure to speed up a patchy economic recovery that is expected to stall in the first quarter.

The final au Jibun Bank Japan Manufacturing Purchasing Managers’ Index (PMI) rose to a seasonally adjusted 52.7 in March from the previous month’s 51.4 reading.

The rise in the headline figure, which was stronger than a preliminary 52.0 reading, marked the fastest expansion in manufacturers’ activity since October 2018.

Output levels rose for the second straight month, with firms reporting that overseas and domestic demand continued to recover as the impact of the health crisis began to dissipate.

But new overseas orders expanded at a slower pace than in February, with firms reporting that external demand strength was centred on Asian economies such as China and South Korea.

“Japanese manufacturers were confident that output would continue to rise over the coming 12 months,” said Usamah Bhatti, economist at IHS Markit, which compiles the survey.

“Firms cited hopes that a successful vaccination rollout which began in March would help to bring a quicker end to the pandemic and allow for a broad-based recovery in demand.”

The survey also showed that producers are facing a jump in input prices, which expanded at their fastest pace since late 2018, mainly due to higher raw material costs.

Manufacturers partly passed on those increased input costs to their customers, the survey said.

(Reporting by Daniel Leussink; Editing by Sam Holmes)