July 2, 2018 / 12:47 AM / a year ago

Japan June manufacturing PMI shows growth but export orders contract

Newly manufactured cars await export at port in Yokohama, Japan, November 15, 2017. REUTERS/Toru Hanai

TOKYO, (Reuters) - - Japanese manufacturing activity grew at a slightly faster pace in June, but export orders fell more than initially reported in a worrying sign of the potential impact of a heated trade dispute between the United States and major economies.

The final Markit/Nikkei survey for Japan on Monday showed the manufacturing Purchasing Managers Index (PMI) was a seasonally adjusted 53.0, lower than the flash reading of 53.1 but still above a final 52.8 in May.

The index remained above the 50 threshold that separates expansion from contraction for the 22nd consecutive month.

“Japan manufacturing PMI data continue to signal that the sector’s current expansion phase still has legs,” said Joe Hayes, economist at IHS Markit, which compiles the survey.

“Concerns do remain however, as new order growth eased to a ten-month low and export sales decreased for the first time since August 2016.”

A bitter trade dispute between the United States and major economies, including Japan’s big export market China, has unnerved investors and policy makers worried the tariff fight could deal a body blow to the global economy.

Indeed, while factory output grew at a robust pace last month in a sign of strength in the manufacturing sector, that solidity could be put to the test if exports continue to decline.

The final index for new export orders went below the preliminary 49.5 and was off May’s 51.1 - marking the first decline in 22 months.

Japan’s economy is expected to rebound in the second quarter from a contraction in the first quarter that ended the longest growth streak since the 1980s bubble economy. Many economists say trade protectionism is the biggest risk to the outlook.

Reporting by Stanley White; Editing by Shri Navaratnam

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