Falling orders hit manufacturing activity in Japan

Manufacturing activity in Japan has grown at its slowest pace since early September last year. The slowdown in new order production has also deepened due to weakening demand from Japan’s major trading partners such as China, the US, and others.

The au Jibun Bank Japan Manufacturing Purchasing Managers' Index fell from 51.5 in August to 50.8 in September.

This is the weakest growth rate since last January, when the index was below the 50.0 flash reading.

According to a senior economist at S&P Global Market Intelligence Joe Hayes, weakness in Japan's manufacturing sector continued and even intensified in September. 

While high inflation has eroded the purchasing power of customers, the slowdown in global economic growth has hurt exports, he added.

The weakness of the yen, as the economist notes, sharply increases import inflation and increases pressure on domestic prices.

The dreary PMI survey data contrasted with the strong official manufacturing data released on Friday. The data showed that in Japan’s economy factories increased output by 2.7% in August, driven by a more stable machinery production and expected output growth in the next two months.

The number of new orders fell at the fastest rate in two years, while output posted its sharpest decline in a year, according to the PMI poll.

"The forecasts suggest that the downward trend in production will continue into the fourth quarter," Hayes said.

"The increase in inventories, which panellists said was due to poor sales performance, highlights the true weakness of underlying demand conditions for the goods produced locally in Japan"

In overseas economies, a sharper downturn is likely to force Japan to rely more and more on domestic consumption,  broader economic activity and investment in their country.