Japan's manufacturing sector almost grew in August

Koichi Kamoshida/Getty Images

Activity levels across Japan’s massive manufacturing sector continued to decline in August, albeit at the slowest pace seen in six months.

The latest Nikkei-Markit “flash” manufacturing purchasing mangers index (PMI) came in at 49.6 for the month, a slight improvement on the 49.3 final reading offered for July.

The PMI measures changes in activity levels from one month to the next. A reading above 50 signals that activity levels are expanding while a reading below this level signals a contraction. In other words, the higher the number the better.

The “flash” reading captures responses from around 85-90% of surveyed firms, and is released one week before the final reading is produced.

Source: Markit

Like the headline index, most of the survey’s subindices registered a stronger reading than July, although most came in below the 50 level signalling a deterioration in activity levels.

The one exception came from output which rose above 50 for the first time since February this year. Offsetting that increase, employment levels fell for the first time since September last year.

The table from Markit below has all the details.

Annabel Fiddes, an economist at Markit, described the result as “mixed”, with the increase in output largely overridden by weak demand.

“Encouragingly, output expanded for the first time in six months (albeit marginally), while companies also saw softer reductions in total new work and export sales,” said Fiddes.

“However, the latest survey also registered a slight drop in employment for the first time since last September.

“Furthermore, relatively weak client demand alongside a strong yen prompted firms to cut their selling prices at the sharpest rate since October 2012 as part of efforts to attract new business.”

Along with the stronger yen, something that makes Japanese exports less competitive on a pure cost basis, Japan’s manufacturing sector has also been hindered recently by supply disruptions caused by major plant shutdowns as well as natural disasters.

Starting on Friday with the release of consumer price inflation figures for July, a raft of Japanese economic data will arrive in the coming weeks including industrial output, household spending, unemployment and household spending figures.

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