Japan February manufacturing shrinks for first time since 2016 amid trade war: flash PMI

TOKYO, Feb 21 (Reuters) - Japanese manufacturing activity contracted in February for the first time in two-and-a-half years as factories cut back output amid shrinking domestic and export orders, a private business survey showed on Thursday. The survey also showed business confidence in Japan soured for the first time in more than six years, highlighting the growing toll that the U.S.-China trade war is inflicting on Asia's export-reliant economies and global manufacturing. The Flash Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 48.5 in February from a final 50.3 in January

Reuters February 21, 2019 07:05:13 IST
Japan February manufacturing shrinks for first time since 2016 amid trade war: flash PMI

Japan February manufacturing shrinks for first time since 2016 amid trade war flash PMI

TOKYO, Feb 21 (Reuters) - Japanese manufacturing activity contracted in February for the first time in two-and-a-half years as factories cut back output amid shrinking domestic and export orders, a private business survey showed on Thursday.

The survey also showed business confidence in Japan soured for the first time in more than six years, highlighting the growing toll that the U.S.-China trade war is inflicting on Asia's export-reliant economies and global manufacturing.

The Flash Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 48.5 in February from a final 50.3 in January.

The index fell below the 50 threshold that separates contraction from expansion for the first time since August 2016.

The pessimistic turn in business sentiment "comes as no surprise given the international headwinds Japanese manufacturers are facing such as a China slowdown and the global trade cycle losing further steam," said Joe Hayes, economist at IHS Markit, which compiles the survey.

"Unless service sector activity can recover from January's decline, the chance of Japan entering a recession in 2019 looks set to rise."

The output component of the flash PMI index fell to a preliminary 47.0 from a final 54.4 in January to show the fastest contraction since May 2016.

Indicators of future activity were equally grim.

Total new orders - domestic and foreign - pointed to a sharper decline in demand than the previous month. Though export orders contracted at a slightly slower pace, it is unlikely to ease doubts about the outlook for overseas demand.

Companies also reduced their purchases of raw materials and other inputs for the second month running.

The PMI survey comes one day after government data showed Japan's exports fell the most in more than two years in January as China-bound shipments tumbled.

Global trade has slowed over the past year as Washington and Beijing ramped up tariffs on each others' goods, disrupting supply chains worldwide. At the same time, economic activity has been weakening noticeably in China and Europe.

Japan could face further weakness if the United States and China do not quickly resolve their differences over trade, some economists say.

Negotiators from both sides are racing to beat a March 1 deadline for a deal, though U.S. President Donald Trump has said that could be extended if an agreement appeared close.

Japan's economy bounced back in the fourth quarter as business and consumer spending recovered from the impact of natural disasters, but trade frictions and a proposed sales tax hike are expected to hinder growth this year.

(Reporting by Stanley White; Editing by Kim Coghill; stanley.white@thomsonreuters.com; +81 3 6441 1984 twitter.com/stanleywhite1; Reuters Messaging: stanley.white.reuters.com@reuters.net)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.