Japan’s manufacturing activity expanded at a slower pace in September as output and new orders softened, although strong overseas demand continued to support the sector.
The S&P Global flash Japan Manufacturing Purchasing Managers’ Index (PMI) fell to 54.1 in September from 54.9 in August. A reading above 50 indicates expansion.
Factory output grew at its slowest pace in three months, while new orders recorded their weakest growth in four months. Both nevertheless expanded for a ninth consecutive month.
New export orders remained a bright spot as overseas demand continued to support manufacturers.
Employment also posted another solid increase, helping private-sector payrolls record their fastest growth in seven months.
Manufacturers’ confidence in the business outlook rose to its highest level since February, with companies citing sustained demand from artificial intelligence-related sectors, semiconductors, defence and automobiles.
Growth in the services sector also slowed, with the flash services PMI falling to 51.6 from 52.5 in August. The composite PMI dropped to 52.5 from 53.5, marking its slowest expansion since May.
Cost pressures eased slightly but remained historically elevated, with companies reporting higher input prices linked to the weak yen, higher energy and raw material costs from the Middle East conflict and rising staff and transport expenses.
“The survey showed encouraging signs when it came to business confidence and employment … Nevertheless firms expressed concerns that high prices and relatively sluggish domestic demand could dampen performance,” said Annabel Fiddes, economics associate director at S&P Global Market Intelligence.
