Japan manufacturing growth slows in October as PMI hits seven-month low

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Japan manufacturing growth slows

Highlights

Japan Manufacturing PMI drops to 53.3 in October from 54.1 in September, marking a seven-month low with output and new orders growth slowing.
Services PMI rises to 52.0 from 51.3, partially offsetting manufacturing weakness, while Composite PMI Output Index holds steady at 52.3 for a 19th consecutive month of expansion.
Private sector new business growth slows to a three-month low, job creation falls to a 14-month low, and year-ahead confidence hits its lowest since July.

October PMI signals softer factory momentum

As reported by Reuters, citing S&P Global, the flash Japan Manufacturing Purchasing Managers' Index falls to 53.3 in October from 54.1 in September. A reading above 50.0 indicates expansion, while a figure below that threshold signals contraction.

New orders for manufacturers rise at the weakest pace since March, while output growth also slows to its softest rate since March. New export business across Japan's private sector increases at the slowest pace in four months, pointing to more moderate demand conditions.

Factory employment rises at a moderate pace in October. Manufacturers also increase purchasing activity, resulting in the largest build-up in input inventories in almost four years.

Services offset some weakness across private sector

The services side of the economy edges higher in October, with the flash S&P Global Japan Services PMI Business Activity Index rising to 52.0 from 51.3. The survey shows stronger business activity and faster sales growth among service providers.

At the broader economy level, the S&P Global Flash Japan Composite PMI Output Index remains unchanged at 52.3, extending private sector expansion to a 19th straight month. Usamah Bhatti, economist at S&P Global Market Intelligence, says overall business activity growth across Japan is unchanged from the previous month but stays weaker than the year-to-date average.

Across the private sector, new business rises at the slowest pace in three months and export business growth eases to a four-month low. Job creation slows to a 14-month low, confidence for the year ahead weakens to its lowest level since July, and input cost inflation accelerates slightly as raw material and labour costs rise, while selling price inflation cools to a four-month low.

Our earlier article on the upgraded global growth outlook explained that firmer consumer spending and a steadier labor market were improving expectations for this year’s expansion. It also highlighted that inflation and supply-chain disruptions remained key risks that could still cool momentum across regions and sectors.

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