Japan manufacturing activity hits 20-month low

Japan's manufacturing activity growth slowed to a 20-month low in September, as companies tried to overcome the consequences of the global slowdown and surging energy and raw material costs, pushed higher by a weakening yen. 

Jibun Bank's Purchasing Managers' Index (PMI) of Japan's manufacturing sector slipped to a seasonally adjusted 51.0 in September. In August, it stood at 51.5. 

The headline figure saw the slowest growth since January 2021. Despite this fact, it  stayed above the 50 mark. A reading above 50 indicates growing activity, while below 50 indicates contraction. 

The PMI dropped as output and new order declines deepend for the third month in a row. The number of new orders declined at the fastest pace in two years. 

As reported by Joe Hayes, senior economist at S&P Global Market Intelligence, which makes up the survey,  the economic growth of the country is subdued. The reason for that is that inflation and global slowdown influence and curb economic activity across both manufacturing and services. 

Less signs of optimism over economic growth for the year ahead are seen in September after having hit the five-month low. It happened partly after yen had depreciated at an unprecedented pace amid the gap between the monetary policy of Japan and the United States.

According to Hayes, the weakening of the yen that we have seen from the beginning of the year up until now continues to increase price pressures. The companies are trying to cope with rapidly rising costs passing them on to the customers. 

The survey also revealed that the au Jibun Bank Flash Services PMI Index was back on track to grow. It increased to a seasonally adjusted 51.9 in September from 49.5 a month earlier.

The au Jibun Bank Flash Japan Composite PMI, which measures activity across the manufacturing and services sectors, was another index that saw an increase. It rose to 50.9 from August's final of 49.4.