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Japan’s manufacturing activity expands at the fastest rate since early 2018

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© Reuters. FILE PHOTO: Smoke comes out of a factory at sunset in Kawasaki’s Keihin Industrial Zone

TOKYO (Reuters) – Japan’s manufacturing activity expanded in April at the fastest pace since early 2018 due to a recovery in global demand, a private sector survey showed on Friday, although new coronavirus restrictions cast a shadow over the economic outlook. general.

The expansion in activity highlights that tailwind manufacturers have been drawing on strong external demand, particularly from China, which forms the basis for keeping the economic recovery intact from last year’s sharp drop in coronavirus.

Au Jibun Bank Japan’s final manufacturing purchasing managers index (PMI) rose to 53.6 seasonally adjusted in April, its strongest expansion since February 2018.

That was up from a flash reading of 53.3 and a final of the prior month of 52.7. It meant that manufacturing activity passed the 50.0 threshold that separates contraction from expansion for the third consecutive month.

The PMI survey showed that production also grew at its fastest pace since February 2018, while the addition of new graduates at the beginning of the country’s fiscal year in April and higher capacity needs due to increased orders drove the job creation rate.

Manufacturers saw input prices rise for the 11th month due to high demand for intermediate goods used for the production of cars and electronics, and the inflation rate of input costs reached its fastest level since the end of 2018 .

Businesses reported a positive outlook for activity over the medium term, said Usamah Bhatti, an economist at IHS Markit, who compiles the survey.

It was too early to say exactly what impact a third state of emergency for Tokyo and other prefectures declared last week to contain the pandemic would have on manufacturers in the coming months.

The survey showed that companies’ production expectations for next year were in line with an IHS Markit forecast of 7.7% industrial production growth this year, Bhatti said.

“This does not fully recover the production lost from the pandemic in 2020,” he said.

“Further disruption in the manufacturing sector cannot be ruled out as COVID-19 restrictions are reintroduced as infections rise once again.”

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