Japan's August Factory Activity Declines at Slower Rate, PMI Reveals

Japan's factory activity contracted in August, influenced by subdued demand, although the rate of decline moderated. The au Jibun Bank flash Japan manufacturing purchasing managers’ index (PMI) increased to 49.5 in August from 49.1 in July, remaining below the 50.0 threshold that distinguishes growth from contraction. Meanwhile, the service sector saw expansion.

Rising price pressures and labor constraints posed ongoing challenges for Japanese firms, particularly in the services sector. The subindex for new orders showed a slower contraction rate in August, while output expanded due to enhanced workforce capacity, which helped address a backlog of orders in the manufacturing sector. Despite these developments, output price inflation eased as manufacturers were hesitant to increase selling prices.