China’s factories are booming, while Japan’s are struggling to keep up

Official data reveals that factory activity in China grew last month at its fastest pace in more than 10 years. However, in Japan, manufacturing activity declined in February at the quickest rate in over two years. With the lifting of Covid restrictions, businesses across the globe are grappling with the challenge of rising costs, spanning from energy to wages.

China’s National Bureau of Statistics reported an increase in China’s manufacturing purchasing managers’ index (PMI) from 50.1 in January to 52.6, marking the highest monthly figure since April 2012. The PMI is a crucial metric for businesses, investors, central banks, and governments, providing insights into current and future economic conditions. A PMI above 50 signifies an expansion in activity from the previous month, whereas a score below 50 indicates a contraction. The greater the deviation from 50, the more significant the shift.

China’s superior performance surpassed expectations, following the relaxation of stringent coronavirus measures in the world’s second-largest economy since late last year. However, Japan’s private manufacturing PMI declined from 48.9 in January to 47.7 in February, reflecting the swiftest slump since September 2020. These numbers underscore the pressing challenges faced by companies in the world’s third-largest economy, including a global economic slowdown, a surge in raw material costs, and demands for firms to raise wages, thus easing the cost of living crisis.

The figures emerged a day after the Japanese government disclosed that the country’s manufacturers, particularly carmakers and computer chip producers, curtailed output in January at the fastest pace in eight months.

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