Investing.com-- Japan’s manufacturing sector unexpectedly rose back into expansion territory in May, boosting overall business activity and helping offset a mild decline in services growth, purchasing managers index data showed on Thursday.
The au Jibun Bank Japan manufacturing PMI rose to 50.5 in May, according to a preliminary reading. The print was higher than expectations of 49.7 and also improved from the 49.6 seen in the prior month.
A reading above 50 indicates expansion, with the sector now growing for the first time since June 2023.
The positive reading came amid improving employment and purchases in the sector, while output and new orders fell at slower paces.
Growth in the services sector persisted, albeit at a slower pace. The au Jibun Bank Japan Services PMI rose 53.6 in May, compared to growth of 54.3 in the prior month, preliminary data showed.
This saw overall business activity, as indicated by the flash composite PMI index, rise to 52.4 in May from 52.3 in April.
“This indicated that growth momentum continued to improve midway into the second quarter of 2024 and hints at a better Q2 GDP reading, after the disappointing first quarter print,” analysts at S&P Global (NYSE:SPGI) Market Intelligence wrote in a note.
But they noted that growth in overall business activity was still moderating, and was heavily biased towards the services sector.
Japan's economy shrank more than expected in the first quarter, weighed down chiefly by weak consumer spending as inflation turned sticky and wage growth stagnated. But this trend is expected to change in the second quarter, especially after major Japanese labor unions won bumper pay hikes for the year.