Economic Buzz: Japan private sector activity grows at fastest pace in three months in June

Flash PMI data from S&P Global showed that Japan?s private sector recorded its strongest growth in business activity in three months during June, supported by stronger manufacturing output and a return to growth in services activity.

The headline seasonally adjusted S&P Global Flash Japan PMI Composite Output Index rose to 52.5 in June from 51.1 in May, marking the 15th consecutive month of expansion. The latest reading was the strongest since March and above the post-pandemic average.

Manufacturing output recorded its second-fastest increase since January 2022 (after April 2026), while services activity returned to growth after stagnating in May for the first time in more than a year.

Demand conditions improved, with total new business rising at the fastest pace in four months. Manufacturing firms reported the strongest increase in new orders since January 2022, partly driven by customers building inventories amid concerns over supply disruptions and future price increases linked to the conflict in the Middle East. Export demand increased only marginally, however, with growth slowing to a six-month low.

Cost pressures intensified during June. Input cost inflation accelerated for the fifth consecutive month and reached its highest level since July 2022, driven by higher energy, fuel and raw material costs. Companies continued to raise selling prices, with output price inflation remaining close to May?s record level.

Rising workloads led to the fastest increase in outstanding business in four months, encouraging further hiring. Manufacturing employment recorded its strongest growth in more than eight years, while services staffing levels increased modestly.

Business confidence remained positive but below historical averages, as firms expressed concerns over inflation, labour shortages and potential supply chain disruptions linked to the Middle East conflict.

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