Japan manufacturing activity slowest in 19 months

Japan's manufacturing activity growth hit the lowest level in 19 months. Output and new order inflows fell amid rising prices for raw materials and energy and weakening global demand.

Japan's services sector saw a sharp drop in activity for the first time in five months. The reason for that was that the declining number of new businesses raised concern about low domestic demand.

The au Jibun Bank Flash Japan Manufacturing Purchasing Managers' Index (PMI) declined to a low of 51.0 in August from a final 52.1 a month earlier and marked the slowest increase in business activity since last January. A reading above 50 indicates growing activity, while below 50 indicates contraction. 

The headline figure was down for the second month in a row due to a fall in output and overall new orders. The number of new orders contracted for the first time in nearly two years. 

According to the survey, optimistic forecasts for the coming year reinforced expectations for the headline figure. Manufacturers' optimism about conditions ahead declined slightly compared to the previous month. 

As reported by Osama Bhatti, economist at S&P Global Market Intelligence, the August data showed that the composite index reached the second-weakest reading this year, despite mild deterioration. 

He also stated that the number of new orders received by companies which aren’t run by the government is worrisome as it decreased for the first time in six months and signaled further deterioration of the situation.

The au Jibun Bank Flash Services PMI Index declined to 49.2 in August.  In July, the index was 50.3. At that time, the index saw its decline for the first time since March. 

The au Jibun Bank Flash Japan Composite PMI, which measures activity across the manufacturing and services sectors, dropped significantly to 48.9 from July's final of 50.2.