Manufacturing growth slowed in December from a 10-month peak in the previous month, but still remained strong, with an increase in new work orders and production remaining sharp.
The Nikkei manufacturing purchasing managers’ index (PMI) slipped to 55.5 in December from 57.6 in the previous month, but was well over the trend average. An index reading of 50 or above suggests expansion and below it points at contraction.
The average PMI print for the December quarter was at 56.3, its highest since the final quarter of FY21.
While companies kept building stocks and were optimistic that output would continue to increase in 2022, business sentiment was somewhat tamed by worries surrounding the latest turn in the pandemic, inflationary pressures and lingering supply-chain disruptions.
Although input costs rose at an above-trend pace, the rate of inflation eased to a three-month low. Companies, in turn, restricted passing on of the additional cost burden to customers to boost sales, with factory gate charges rising at the slowest pace in over a year.
“There were tentative signs that inflationary pressures started to subside, but companies weren’t particularly confident that such a trend would continue. Despite easing in December, input cost inflation was still running at one of its highest rates in around seven-and-a-half years,” said Pollyanna De Lima, economics associate director at IHS Markit, which releases the PMI readings.