Japanese manufacturing activity contracted in June at roughly the same pace as the previous month, a preliminary survey showed, but concerns remain due to supply chain disruptions from an earthquake in April and falling exports.
The Markit/Nikkei Japan Flash Manufacturing Purchasing Managers Index (PMI) was a seasonally adjusted 47.8 in June, little changed from a final reading of 47.7 the previous month.
The index remained below the 50 threshold that separates expansion from contraction for the fourth straight month.
The preliminary index for new orders was 45.8, higher than 44.7 in the previous month, but still showing five consecutive months of contraction.
“Latest survey data pointed to a further deterioration in manufacturing conditions in Japan. Both production and new orders declined at marked rates, led by a sharp drop in international demand,” Markit said.
It said the earthquakes in April continued to have a negative impact on the PMI data.
Strong earthquakes struck the southern manufacturing hub of Kumamoto in mid-April, which destroyed houses, triggered landslides and disrupted production at electronics and car parts factories in the area.
Japan’s economic growth is expected to ease to an annualized 0.5 percent in the second quarter from 1.9 percent the previous quarter as exports slow, a Reuters poll of economists showed.
The yen JPY= has risen around 15 percent versus the dollar so far this year, and there are concerns that further yen gains could hurt exports, squeeze corporate earnings and lead companies to cut production.
Markit noted that employment growth eased to the weakest in nine months of expansion, suggesting further stimulus may be needed to support the economy.