Tokyo – A survey of the private sector that came out on Monday showed that Japan’s manufacturing sector shrank in August. This was blamed on fewer orders coming in from other countries. The S&P Global Japan Manufacturing Purchasing Managers’ Index (PMI) rose slightly from 48.9 in July to 49.7, but it is still below the 50.0 level that marks expansion from contraction.
The poll found that while the overall rate of manufacturing production contraction eased, a major worry was a “steeper drop in new export business, which fell at the sharpest pace in nearly a year-and-a-half,” said Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence. Companies said that demand from important markets like China, Europe, and the US was lower.
This information backs with what the government said in July, when it said that Japanese exports were at their lowest level in more than four years, mostly because vehicle exports to the US were down. In July, Japan and the US signed a trade pact to lower tariffs on Japanese imports, but there are still questions about how it would be fully carried out.
Even while production and orders were going down, the poll found a bright light in employment, with employers hiring more people for the ninth month in a row in case demand goes up in the future. However, company confidence sank to its lowest point in three months. Companies said they were worried about client demand, an aging population, and the lingering effects of US tariffs.
The study also found that input costs went up a little from their lowest point in four and a half years, but selling prices went up at their slowest rate in more than four years. Japanese companies couldn’t raise prices as much because of fierce rivalry in the industry and customers asking for reductions.