TOKYO (Reuters – Japan’s factory activity grew at its fastest rate in six months, in October. This positive sign is good news for Japan as the third-largest country in the world. Japan must navigate the challenges posed worldwide by chip and raw material shortages.

A private-sector survey revealed that manufacturers felt the impact of material shortages, delivery disruptions, and the steepest rise in input prices since more than 13 years.

In October, the final au Jibun Bank Japan Manufacturing Purchasing Managers’ Index rose to 53.2 from 51.5 on a seasonal adjusted basis. This was the ninth consecutive month of growth.

Although the headline reading was slightly higher than 53.0, it was due to a slight improvement in production and overall orders growth, their rates of expansion were still modest, and supply issues remained an issue.

“Manufacturers still expressed concern about significant supply chain disruptions that have dampened demand and output,” stated Usamah Bhatti from IHS Markit.

The sharp increase in input costs was caused by material shortages and delays. Client charges were increased to try to pay margins. Inflation at factory gates rose to an unprecedented 13-year high.

According to data last week, Japan’s factory output fell for the third month straight in September due to an ongoing global supply shortfall. The risk of an economy contraction in third quarter was raised and the recovery was cast into doubt.

The bright side of consumption is that the PMI survey’s headline figure for consumer goods rose at its highest level since May 2019, HIS Markit reported. This was due to the fact that firms have been helped by the decreasing impact of the coronavirus epidemic in the home.

The outlook for manufacturing for the next 12 months was also positive for manufacturers, which suggests that they are optimistic about the future.

Overall, positive sentiment was the highest recorded since July 2012 when data began to be collected.