Manufacturing conditions in Japan worsened at a weaker pace in August. Production picked up for the first time since February, while new orders declined at the slowest rate in six months. 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 PMI posted 49.5, up slightly from 49.3 in July, thereby signalling a softer deterioration in operating conditions at Japanese manufacturers. Moreover, the latest reading was the highest recorded since February.
For the first time in six months, production at Japanese manufacturers increased in August. However, the rate of expansion was only slight and remained below the historical average. Where output growth was recorded, panellists mentioned new project launches generating greater demand.
According to sub-sector data, the latest rise in production was driven by intermediate goods producers, as both consumer and investment goods producers recorded modest declines.
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.
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.
Employment levels stabilised in August, after having increased in each of the previous ten months. Meanwhile, manufacturers increased their buying activity for the first time since February. However, the rate of expansion was only marginal overall.
Resulting from a slight increase in production and a fall in new orders, less pressure was placed on capacity and backlogs of work were depleted. All three sub-sectors recorded a fall in volumes of unfinished work.
Finally, input costs decreased amid reports of lower imported raw material prices resulting from the stronger yen/dollar rate. This helped to reduce charges, with panellists also mentioning increased competition as a factor driving down selling prices.