February 22, 2018
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Japan August Factory Activity Shows Signs of Steadying But Still Weak: PMI


Japanese manufacturing activity showed signs of steadying in August as output rose for the first time in six months, but the expansion was only slight, a private survey showed, casting doubts over whether the economy will return to growth in the current quarter.

The Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) inched up to 49.5 in August on a seasonally adjusted basis, versus a preliminary 49.6 and up from a final reading of 49.3 in July.

While the decline was marginal, the headline index remained below the 50 threshold that separates contraction from expansion for the sixth month.

The index for output rose to 50.2 from 49.4 in the previous month. It was the first increase since February, though it was slight and remained below the historical average.

"The latest survey data signaled an increase in manufacturing production in Japan for the first time since February and follows on from previously slower declines following May's sharp contraction," said Amy Brownbill, an economist at Markit.

However, new orders and export orders continued to fall, though at a slower rate. Some survey respondents cited weakness in orders from Chinese clients.

Highlighting the fragility of Japan's economy, growth in the country's industrial output ground to a halt in July after June's gains.

Economic growth stalled in April-June as consumer spending slowed and weak global demand hurt exports, and analysts had expected any rebound in the current quarter to be modest.

With the economy sputtering and price growth well short of the Bank of Japan's 2 percent target, a majority of economists expect the central bank to ease policy further next month alongside a planned review of its existing stimulus program.

Further clouding the inflation outlook, the Markit PMI survey showed Japanese manufacturers cut prices of their goods for the ninth straight month, citing greater competition and lower input costs. Markit is a registered trade mark of IHS Markit Limited.

The government, for its part, is set to roll out economic stimulus featuring 13.5 trillion yen ($132 billion) in fiscal measures for public works and other spending to spur economic growth.

(Reporting by Minami Funakoshi; Editing by Kim Coghill)

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