Key insights
- Japan's private sector growth slowed in March due to rising costs linked to the Middle East conflict and a weaker yen. While manufacturing remains optimistic due to AI, defense, and semiconductor demand, services firms are more cautious. This slowdown, coupled with global inflationary pressures, poses a slight downside risk to overall global growth sentiment, indirectly impacting US equities.
Investing.com-- Japan’s private sector growth slowed in March as activity in both manufacturing and services lost momentum, while rising costs linked to the Middle East conflict added to pressure on businesses, according to data released on Tuesday.
The S&P Global flash Japan Manufacturing Purchasing Managers’ Index (PMI) fell to 51.4 in March from 53.0 in February, below a forecast of 53.2, though it remained above the 50 threshold separating expansion from contraction.
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The services PMI eased to 52.8 from 53.8, while the composite output index, which combines manufacturing and services activity, dropped to 52.5 from February’s 33-month high of 53.9, marking the slowest pace of private-sector expansion in three months.
Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said growth in business activity, new orders and employment all softened in March as firms faced uncertainty stemming from the war in the Middle East.
She said higher fuel costs, supply chain disruptions, a weak yen and rising labour expenses pushed input cost inflation to its fastest pace in 11 months.
Services firms turned more cautious, whereas manufacturers remained relatively optimistic, supported by expectations of stronger demand from AI, defence and semiconductor industries, the survey showed.