TOKYO (Reuters) - Japan's factory activity expanded at a slower rate in August as a resurgence of coronavirus cases in Asia disrupted supply chains across the region, sinking overseas orders into contraction for the first time in seven months.
Manufacturers withstood the pandemic's hit in part thanks to their positive outlook for the coming twelve months, even as the highly infectious COVID-19 Delta variant is pushing countries in Asia-Pacific back into lockdown mode.
The final au Jibun Bank Japan Manufacturing Purchasing Managers' Index (PMI) in August eased to 52.7 on a seasonally adjusted basis from 53.0 in the previous month, and up slightly from a 52.4 flash reading.
"A sharp rise in COVID-19 cases in South East Asia was among the key factors listed by Japanese manufacturers for the easing in demand," said Usamah Bhatti, economist at IHS Markit, which compiled the survey.
"Severe supply chain disruption partly caused by pandemic restrictions and raw material shortages remained a dampener on production and orders."
The PMI survey showed that overall new orders expanded at their slowest pace since January, while new export orders posted their first contraction since that month.
Overall output saw a rise, but its pace eased from the prior month as the intensifying health crisis and a lack of raw materials weighed on production.
The survey also showed output for intermediate goods grew at their fastest pace in four-and-a-half years, offsetting weaker demand for investment and consumer products.
Input prices maintained a sustained increase, while companies' expectations for the year ahead remained firm, though they eased to the softest since January.
"Though still optimistic, Japanese goods producers were wary of the continued impact of the pandemic and supply chain disruption," said Bhatti.