Japan Big Manufactures’ Confidence Strengthens In Q2: Tankan

Japan’s big manufactures’ confidence strengthened further in the second quarter suggesting that the economy is set to recover sustainably from the pandemic-driven downturn.

The large manufacturers’ sentiment index rose to +14 in the second quarter from +5 in the prior quarter. The expected level was 15.

The big non-manufactures’ confidence indicator advanced to +1 from -1 in the preceding quarter.

The survey showed that large manufacturers’ business outlook index advanced to 13 from the non-manufacturers’ outlook improved to +3.

Large enterprises plan to increase their fixed asset investment by 9.6 percent in the fiscal year 2021, in contrast to an 8.3 percent drop in the previous year.

The survey was conducted between May 27 and 30.

The further rebound in the Tankan survey supports the assessment that the economy’s disappointing start to the year would not prevent vaccines driving a strong rebound in the second half of the year, Tom Learmouth, an economist at Capital Economics, said.

And firms’ upbeat capital spending plans bolster the view that business investment will soon recover sharply, the economist added.

The Tankan survey suggests that the best of the recovery from the big 2020 Covid-induced dip in activity has now passed, Robert Carnell, an ING economist, said. The economist expects GDP growth to be practically flat sequentially in the second quarter, and for modest quarterly growth thereafter to deliver full-year growth of just 2.2 percent.

Elsewhere, Purchasing Managers’ survey results from IHS Markit showed that the manufacturing sector continued to expand in June but at a slower pace as output and new orders expanded at the softest rates in five months.

The au Jibun Bank manufacturing Purchasing Managers’ Index fell to 52.4 in June from 53.0 in May. The score was above economists’ forecast of 51.5.

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