Japan's factory activity slows in March, Middle East tensions push up costs

Investing.com - Data released on Tuesday showed that Japan’s private sector growth slowed in March, with both manufacturing and services activity losing momentum, while rising costs related to Middle East conflicts increased pressure on businesses.

The S&P Global Japan Manufacturing Purchasing Managers’ Index (PMI) fell from 53.0 in February to 51.4 in March, below the 53.2 forecast, but still above the 50 mark that separates expansion from contraction.

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The services PMI declined from 53.8 to 52.8, while the composite output index (combining manufacturing and services activity) dropped from a 33-month high of 53.9 in February to 52.5, marking the slowest private sector expansion in three months.

Annabel Fiddes, Deputy Chief Economist at S&P Global Market Intelligence, said that due to uncertainties caused by the Middle East conflict, business activity, new orders, and employment growth all slowed in March.

She noted that rising fuel costs, supply chain disruptions, a weak yen, and increasing labor costs pushed input cost inflation to its fastest pace in 11 months.

The survey showed that service companies became more cautious, while manufacturing firms remained relatively optimistic, supported by expectations of increased demand in AI, defense, and semiconductor industries.

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