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Japanese manufacturing grows at slowest pace in 19 months

Reuters/Issei Kato
A worker at a Mitsubishi factory in Kawasaki, south of Tokyo, on May 18, 2020
  • Output and new orders fell for the second month in a row, survey found
  • Activity in the services sector contracted in August

Japanese manufacturing growth slowed in August after declines in output and new orders, as businesses grapple with persistent rises in raw material and energy costs and weakening global demand.

The au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) recorded its most sluggish performance in 19 months, falling to a seasonally adjusted 51.0 in August, from 52.1 in July.

Activity in the services sector contracted for the first time in five months, as a fall in new business raised worries about lacklustre demand at home.

The manufacturing PMI figure – just above the 50 mark that separates expansion from contraction – was pulled down by a second consecutive month of declines in output and new orders. New orders shrank at the fastest rate in nearly two years.

Optimism about conditions for the year ahead kept the figure above 50, the PMI survey showed. Producers only became slightly less optimistic about conditions ahead compared to the previous month.

“August data signalled the second-weakest reading in the composite index so far this year, though the rate of deterioration was only mild,” said Usamah Bhatti, an economist at S&P Global Market Intelligence, which compiles the survey.

“Of concern was the amount of new business received by private sector firms, which reduced for the first time in six months and pointed to further weaknesses to come.”

The au Jibun Bank Flash Services PMI Index slipped to a seasonally adjusted 49.2 in August from July’s 50.3, contracting for the first time since March.

The composite PMI, which includes both manufacturing and services, recorded a marked decline to 48.9 from July’s final figure of 50.2.