TOKYO (Reuters) - Japan's manufacturing activity expanded at the slowest pace in three months in May, as supply bottlenecks due to parts shortages and China's COVID-19 lockdowns caused output and new orders growth to slow.
Activity in the services sector improved for the second consecutive month on stronger domestic demand due to the fading impact of the pandemic, though service-sector firms faced a drag from the sharpest rise in input prices on record.
The au Jibun Bank Flash Japan Manufacturing Purchasing Managers' Index (PMI) slipped to a seasonally adjusted 53.2 in May from a final 53.5 in April. The 50-mark separates contraction from expansion.
Output and overall new orders both expanded at their slowest rate in three months, as uncertainty over the outlook for price and supply developments lingered.
New overseas orders shrank at the fastest pace since July 2020 in a sign of cooling demand from China, Asia's top economy and Japan's biggest trading partner.
Manufacturers' input prices rose for the 24th straight month at an increasingly fast pace, while delivery times lengthened to the greatest extent since April 2011.
"Private sector firms reported that the reduced impact of COVID-19 had lifted services activity, most notably in the tourism sector," said Usamah Bhatti, economist at S&P Global (NYSE:SPGI) Market Intelligence, which compiles the survey.
"That said, the renewed introduction of lockdown measures across China and economic sanctions placed on Russia amid the Ukraine war had exacerbated supply chain disruptions, with greater reports of material shortages and severe delivery delays."
The au Jibun Bank Flash Services PMI Index improved to a seasonally adjusted 51.7 in May from the prior month's 50.7 final, pushing up the composite index despite the slower manufacturing activity expansion.
The au Jibun Bank Flash Japan Composite PMI, which is calculated by using both manufacturing and services, rose to 51.4 from a final of 51.1 in April.