TOKYO (Reuters) -Japan’s manufacturing sector activity fell at the fastest pace in six months in September, driven by further declines in new orders, a private sector survey showed on Wednesday.
The S&P Global flash Japan Manufacturing Purchasing Managers’ Index (PMI) dropped to 48.4 in September from 49.7 in August, further below the 50.0 threshold that separates growth from contraction to the lowest reading since March.
The data showed the manufacturing output index also falling to the lowest in six months, while the index for new orders hit a five-month low.
The decline in new orders was linked by some firms to cautious inventory policies amid challenging market conditions, contributing to a fall in production. The decline in export orders, however, eased from August’s 17-month low.
The broader outlook for Japan’s export-reliant economy remains uncertain due to U.S. tariffs and an expected central bank rate hike.
Meanwhile, cost pressures for manufacturers abated somewhat. Input price inflation has eased to levels not seen since early 2021, although output inflation accelerated from August.
The services PMI in contrast was a bit more upbeat, at 53.0 in September, only slightly down from August’s 53.1, having remained in expansionary territory for six months.
“The surveys suggest that the service sector remains a key growth engine, and saw a further solid increase in activity, which helped to offset a deepening reduction in manufacturing production,” said Annabel Fiddes, economics associate director at S&P Global Market Intelligence.
The services sector has benefited from robust domestic demand, even though it faced challenges from declining export orders. Employment in the services sector also saw a slight rise, helping offset manufacturing jobs, which in September shrank for the first time since November last year.
The composite PMI, which combines both manufacturing and services, decreased to 51.1 in September from August’s six-month high of 52.0, marking the slowest growth in overall business activity since May.
(Reporting by Kantaro Komiya; Editing by Sam Holmes)
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