Japan factory activity slows in June as COVID curbs hit supply chain

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Japan factory activity slows in June as COVID curbs hit supply chain

Worker walks near a factory in the Keihin Industrial Zone in Kawasaki.

TOKYO Reuters -- Japan's factory activity slowed in June as China's strict COVID 19 curbs took a toll on manufacturing demand, even though service sector sentiment hit a nearly nine-year high on the fading pandemic drag.

China has had a COVID 19 lockdown that has disrupted supply chains, which has had a significant impact on trade-reliant economies such as Japan.

The Jibun Bank flash Japan Manufacturing purchasing managers index PMI fell to a seasonally adjusted 52.7 in June from a final 53.3 in May, marking the slowest expansion since February when it was 52.7.

In April and May, the manufacturing PMI grew at a slower rate than in the previous month.

New orders fell for the first time in nine months due to the deeper pressure on already disrupted supply chains, while output grew at its slowest rate in three months, according to the survey.

Tourism helped strengthen private sector conditions for a second straight month, as new business in the services sector increased for a second consecutive month.

The activity at Japanese private sector businesses increased solidly, according to Usamah Bhatti, economist at S&P Global Market Intelligence.

Private sector sentiment saw the biggest rise since November due to the strongest expansion in services since October 2013, he said.

The PMI Index of the Jibun Bank Flash Services improved to a seasonally adjusted 54.2 in June from the previous month's 52.6 final. The 50 mark separates contraction from expansion.

The au Jibun Bank Flash Japan Composite PMI, which was calculated using both manufacturing and services, rose to 53.2 from a final of 52.3 in May.

Japanese firms were under pressure due to high raw material prices, according to the survey.

The price of Japanese goods and services went up for the second consecutive month, as higher material and staff cost burdens were partially passed through to customers, according to Bhatti.