TOKYO, Reuters – Japan’s manufacturing activity grew faster than the previous month of March due to domestic demand gaining strength from the waning effects from the coronavirus epidemic.

However, activity in this sector saw a steep decline in export orders due to external demand suffering from the pandemic restrictions in China and Russia’s war in Ukraine. This caused disruptions in supply chains and increased price pressures.

The seasonally adjusted final au Jibun Bank Japan Manufacturing Purchasing Managers’ Index was 54.1 in March. It rose from a flash 53.2 reading to the last month’s 52.7.

According to the reading, manufacturing activity was at or above 50.0 which is the threshold that distinguishes between contraction and expansion. This occurred for the 14th consecutive month.

According to Usamah Bhatti (economist at IHS Markit), “The Japanese manufacturing industry saw an improvement of operating conditions at the beginning of the first quarter.”

The growth of new orders was accelerated by the recovery from COVID-19’s spike at the beginning of the year.

The PMI survey found that the number of export orders dropped at its highest rate in twenty months. This suggests less stability on overseas markets.

Bhatti explained that export orders fell after the return of coronavirus restraints in China, Russia and Ukraine. Russia considers its intervention in Ukraine “special”.

Bhatti stated that there was also anecdotal evidence linking the war with aggravated supply and price pressures.

According to the survey, manufacturers experienced the sharpest increase in input prices in August 2008 after a dramatic rise in the cost of oil.

The optimism of firms about the output situation for the next 12 months was slightly lower due to the negative outlook on overseas risks. They also noted a decrease in lead time amid material shortages.

Bhatti explained that the survey showed a record-breaking increase in inventories of inputs, as firms tried to expand safety stocks and eliminate unused inputs due to critical component shortages.