TOKYO (Reuters – Japan’s factory activities grew at its fastest pace for four years in January. While output growth picked-up, pressure from a persistent chips shortage, rising input price and the coronavirus panademic clouded their outlook.

However, the overall activity of the private sector contracted for the first time since April. This was due to a spike in Omicron coronavirus cases that harmed customer-facing companies in the service industry.

The seasonally adjusted au Jibun Bank Flash Japan Manufacturing PMI (Purchasing Managers’ Indicator) rose to 54.6, from 54.3 in the previous month. This is the highest rate of growth since January 2018.

The fastest rise in output prices reported by manufacturers since July 2008 was recorded by them. This suggests that firms are increasingly passing higher input costs on to their customers, who continue to increase rapidly.

Following a month of slow momentum, the pace of output growth and new orders increased.

However, activity in services was severely affected by concerns over the Omicron variant and the record-breaking rise in coronavirus cases.

From December’s last 52.1, the au Jibun Ban Flash Services PMI Index fell to 46.6. This was the slowest pace in five years.

Survey results showed that the sector saw a rapid increase in job losses for the second consecutive month, reaching its highest rate since May 2020.

According to Usamah Bhatti (economist at IHS Markit), private sector companies reported that the increase in COVID-19 cases stemming from the transmissible Omicron version had hampered client confidence.”

“The labour market was affected by disruptions, as employment fell for the first-time in one year.

Composite PMI au Jibun Bank Flash Japan Composite, which uses both manufacturing and service, fell to 48.8 last month from 52.5.