November’s data showed the fastest rate of contraction in Japan's manufacturing activity over the past two years. This is due to strong inflationary pressures, pushing demand down in the country.
The Purchasing Managers' Index (PMI) in Japan's manufacturing sector from au Jibun Bank Flash hit 49.4 in November. In contrast, the previous month's reading stood at 50.7.
The country's manufacturing activity fell below 50, marking the first decline in Japan's economy since January 2021.
Laura Denman, economist at S&P Global Market Intelligence, said inflationary pressures, coupled with weakening demand, are likely to affect the performance of the manufacturing sector, reducing the number of new orders.
A slowdown has also been witnessed in the services sector. The survey showed that the PMI in the services sector, compiled by au Jibun Bank, reached a seasonally adjusted 50.0 in November. Earlier, the index stood at 53.2.
These factors put pressure on the composite index that is based on combined data from the manufacturing and services sectors.
Thus, the composite PMI from au Jibun Bank fell from 51.8 to 48.9. This decline is the fastest since February 2022.