Japan manufacturing conditions deteriorate at a slower pace in August

Manufacturing conditions in Japan deteriorated at a slower pace during the month of August, as production picked up for the first time since February, while new orders declined at the slowest rate in six months.

Further, buying activity also rose slightly during the month while employment levels were stable. On the price front, input prices declined, helping to push down charges further.

The headline Nikkei Japan Manufacturing Purchasing Managers’ Index (PMI) posted 49.5, up slightly from 49.3 in July, thereby signaling a softer deterioration in operating conditions at Japanese manufacturers. Moreover, the latest reading was the highest recorded since February.

New orders decreased for the seventh month running in August. Data suggested that a fall in international demand contributed to the overall decline in total new orders. However, the rate of contraction eased to the weakest since February, Markit reported.

New export orders also declined at the slowest pace in six months during August. Firms which saw a reduction in international demand mentioned a fall in trade volumes from China. Meanwhile, manufacturers increased their buying activity for the first time since February. However, the rate of expansion was only marginal overall.

"The improved trend matches the current IHS Markit forecast of year-on-year growth in industrial production (1.0 percent)," said Amy Brownbill, Economist, IHS Markit.