Latest survey data signalled a slight improvement in operating conditions at Japanese manufacturers. Production rose for the second consecutive month, while total new orders declined at the weakest rate in the current eight-month sequence of contraction. International demand also increased for the first time since the start of 2016.
As a result, goods producers took on additional workers, albeit at a marginal pace. Manufacturers also benefited from lower cost burdens as input prices declined for the ninth month running.
The headline PMI posted at 50.4 in September, up from 49.5 in August and signalling a modest improvement in manufacturing conditions. Moreover, the latest reading was the highest since January and broadly in line with the long-run average (50.6).
Supporting the overall improvement in the manufacturing sector was an increase in production for the second month running. However, the rate of expansion was only slight, as 65% of companies recorded no change in output compared to August. Of the three market groups surveyed, both consumer and intermediate goods producers recorded an expansion.
Meanwhile, new orders declined at the weakest pace in the current eight-month period of contraction. Data suggested that the fall in total new orders was mainly a result of weak domestic demand as new exports orders rose for the first time since January.
Firms linked higher international demand to greater trade volumes with China, Taiwan and Europe. Both consumer and intermediate goods producers registered an expansion, with the latter noting the sharper increase.
Due to an increase in production, firms were more optimistic towards taking on additional workers, with the rate of job creation picking up slightly. All three market groups noted an expansion in payroll numbers. Meanwhile, input buying declined, albeit marginally.
Finally, lower imported raw material prices meant cost burdens were reduced further. This enabled manufacturers to lower their charges for the tenth consecutive month. Panellists also mentioned greater competition and pressure from clients as factors behind the fall in selling prices.
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