A latest survey report shows that the demand for artificial intelligence (AI) and chips continues to drive growth in the Japanese manufacturing industry in July this year. Factory output reached its fastest pace in over 12 years, with new orders recording the largest increase in nearly four and a half years.
According to the PMI (Purchasing Managers’ Index) for the Japanese manufacturing industry released by S&P Global on Sunday, August 2, the final value for July was 54.5. While slightly lower than June’s 54.8 and the initial value of 54.7, it has remained above the 50 mark for seven consecutive months.
The survey indicates that factory output in July grew at the fastest rate since February 2014, while new orders reached their highest level since January 2022. Many interviewed companies mentioned robust demand in the semiconductor and artificial intelligence-related industries.
Overseas orders also showed impressive growth, reaching the highest rate in over five years. Businesses commonly reported a continuous increase in orders from Asian and American markets, further expanding overall production activities.
According to a Reuters report, Annabel Fiddes, Deputy Chief Economist at S&P Global Market Intelligence, stated: “Many companies have noted that the improvement in manufacturing coincides with the global semiconductor industry rebound, with some also pointing out sustained growth in the manufacturing sector related to artificial intelligence.”
As production expands, procurement activities by companies have noticeably accelerated, with the procurement growth rate reaching its highest level since April 2022. The survey suggests that due to ongoing uncertainty in the Middle East, many companies are concerned about potential disruptions in the supply chain. Therefore, they are preemptively purchasing raw materials and increasing inventory to mitigate possible risks.
Fiddes mentioned that the early stocking by companies has “to some extent further strengthened the overall performance of the manufacturing industry.”
In terms of cost pressures, the rate of cost increases for companies has dropped to the lowest level since March this year. However, influenced by the situation in the Middle East, oil and raw material prices remain high, leading to continued cost pressures for businesses. Consequently, they continue to raise product prices, albeit at a slower pace compared to June.
The survey also shows that Japanese manufacturers remain optimistic about the future outlook, with business confidence in July reaching its highest level in four months. Most interviewed companies anticipate that orders and output are likely to continue increasing in the coming months, driven by the continuous growth in global demand for semiconductors and artificial intelligence.