Japan December manufacturing PMI lifted by best output growth in eight months

© Reuters. FILE PHOTO - A worker walks past newly produced cars at an industrial port in Kawasaki© Reuters. FILE PHOTO – A worker walks past newly produced cars at an industrial port in Kawasaki

TOKYO (Reuters) – Japanese manufacturing activity expanded more in December than earlier forecast as output increased at the fastest pace in eight months, a revised survey showed on Friday, a sign the economy ended the year on strong footing.

The final Markit/Nikkei Japan Manufacturing Purchasing Managers’ Index (PMI) was a seasonally adjusted 52.6 in December, up from a flash reading of 52.4 and higher than a November’s final 52.2.

The index remained above the 50 threshold that separates contraction from expansion for the 28th consecutive month.

The final index for output was 54.0, above a preliminary 53.7 and higher than the 52.4 reading for November.

December’s final index for export orders was revised up to 49.1 from a preliminary 48.0, but a significant drop from November’s 50.8 and the largest contraction for a month since June. Overseas demand remains a concern amid trade friction between the United States and China.

“The final print of the December manufacturing PMI showed that Japan’s goods-producing economy looks set to contribute to a bounce-back in gross domestic growth for Q4,” said Joe Hayes, economist at IHS Markit, which compiles the survey.

“Nonetheless, the survey data provide reason to remain cautious on growth prospects,” he said, citing the contraction in export orders.

The revised survey also showed that business optimism weakened for a seventh consecutive month, suggesting that risks posed by trade protectionism and a slowdown in overseas economies are weighing on corporate sentiment.

Tokyo will begin its own free trade talks with the United States sometime in 2019, which could pose another risk to Japan’s export-focused economy.

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