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Japan PMI August 2019

Japan: Manufacturing PMI inches up in August but remains in contractionary territory

The Jibun Bank flash manufacturing Purchasing Managers’ Index (PMI) rose from July’s 49.4 (previously reported: 49.6) to 49.5 in August. Therefore, the index remains below the 50-point threshold that separates expansion from contraction in the manufacturing sector.

August’s print reflected weaker declines in all-important output and new orders as well as in stocks of purchases, while suppliers’ delivery times lengthened at a milder pace. Despite remaining above the 50-point threshold, employment growth lost some steam in August. On the price front, input inflation softened in August likely due to lower oil prices, while output charges declined at a weaker pace. Lastly, manufacturers were less optimistic about the near-term outlook than in June.

Overall, however, Japan’s economic outlook appears to be rosier than the picture offered by the manufacturing PMI given the solid gains in the services sector. Joe Hayes, an economist at IHS Markit, which compiles the survey, noted that:

“Preliminary August PMI data give plenty of promise that the solid growth trend seen in the GDP outturns so far this year could indeed stretch into the third quarter. […] The driving force behind this remains the service sector, which is being lifted by resilient demand within the domestic economy […] allaying fears, at least for the time being, that strong external headwinds being felt within the manufacturing sector could spread to other parts of the economy”.

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