Japan factory activity contracts due to weak economy and demands
Output and new orders decline as economy and demand remain weak
Japan’s factory activity remained subdued in September, with output and new orders contracting amidst a weak economy and sluggish overseas demand, according to a private-sector survey released on Tuesday. The au Jibun Bank Japan manufacturing purchasing managers’ index fell to 49.7 in September from 49.8 in August, although it slightly improved from the flash reading of 49.6. This marks the third consecutive month the index has stayed below the 50.0 threshold, which indicates contraction.
Usamah Bhatti from S&P Global Market Intelligence noted the “muted trends across the manufacturing industry.” The output subindex saw a slight decline in September due to a lack of new business. New orders decreased, continuing their contraction since June 2023. Companies cited a stagnant economy, inventory adjustments, and labour shortages as the primary reasons for the drop in new orders. Weak sales in the U.S. and China have kept the new export orders subindex in decline since March 2022.
Employment in the manufacturing sector increased for the seventh month in a row in September, though at the slowest rate during this period. Manufacturers continued to struggle with higher costs of raw materials, labour, and logistics, despite inflation reaching a five-month low. Companies partially offset these higher costs by raising output charges, but the rate of increase was the slowest since June 2021.
Japan August industrial output falls 3.3% month-on-month vs estimate of 0.5% fall: Bloomberg
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The outlook for production remained optimistic, with manufacturers expecting demand and mass production of new products to succeed, although confidence was the lowest since December 2022. Firms also anticipated a recovery in the semiconductor and automobile sectors.
Data from Monday indicated that Japan’s factory output dropped in August, attributed to typhoon-related disruptions in motor vehicle production and weak sales in the U.S.
What Other Media Are Saying
- Reuters: Japan’s factory activity is subdued due to weak demand, as PMI data highlights typhoon disruptions and soft U.S. sales, impacting motor vehicle production.(read more)
- Reuters reports Japan’s factory activity declined in September, marked by softer production and declining new orders, despite continued service sector expansion.(read more)
- Hindustan Times/Buzz FX reports Japan’s factory activity subdued due to weak demand, as PMI shows a decline, indicating economic slowdown and reduced production levels.(read more)
Frequently Asked Questions
Here are some common questions asked about this news
How did Japan’s factory activity perform in September?
Japan’s factory activity was subdued with output and new orders contracting in September.
What was the final au Jibun Bank Japan manufacturing purchasing managers’ index for September?
The index dipped to 49.7 in September from 49.8 in August.
Why did new orders in Japan’s manufacturing sector shrink?
New orders shrank due to a stagnant economy, inventory adjustments, and labour shortages.
How did weak overseas demand affect Japan’s manufacturing?
Weak sales in the U.S. and China kept new export orders in decline since March 2022.
What are manufacturers’ expectations for future production in Japan?
Manufacturers are optimistic, hoping for demand recovery and mass production of new products, despite low confidence.
