TOKYO (Reuters – Japan’s manufacturing activity accelerated from March’s previous month due to a decrease in COVID-19 patients in the country. Although orders and production rose, the outlook was clouded by surging input costs and Russia’s war with Ukraine.

The services sector which was hit hard by the pandemic contracted for the third consecutive month but has seen its activity slow down.

From a December 52.7, the au Jibun Bank Flash Japan Manufacturing PMI (Purchasing Managers’ Indicator) rose to 53.2 in March. If the reading is below 50, it means that there has been contraction in March. A reading above 50 suggests expansion.

Survey results showed that output rose from the prior month’s contraction. However, activity in new orders experienced an expansion even though it was at its slowest pace in six months.

The Ukraine conflict, soaring crude oil and material prices and slowing momentum hurt the momentum of the world’s third largest economy.

According to Usamah Bhatti (economist at IHS Markit), “Firms in the Japanese private sector reported an increase in price pressures.”

According to the report, “Input prices rose at a fastest pace since August 2008. Businesses attribute the increase to rising raw material prices (notably oil, energy and semiconductors) amid worsening supplier performance.

Au Jibun Bank Flash Services PMI Index climbed to seasonally adjusted 48.7 compared to February’s final 44.2. It marks the third month of contraction.

Composite PMI au Jibun Bank Flash Japan Composite, calculated using manufacturing and services, fell for the third consecutive month. It rose to 49.3 from 45.8 last month.

Bhatti stated that Japanese companies reported less optimism in the next 12 months than they did in March.

“Positive feelings were at their lowest level for fourteen months, amid worries about the economic consequences of the Russia/Ukraine conflict.”