Factory activity in Japan falls for fourth straight month in September

Early indicators showed sustained weakness in output and new orders.

The overall health of Japan’s manufacturing sector has deteriorated further in September, marking its fourth consecutive months of contraction as demand continues to disappoint, latest market indicators showed. 

The headline au Jibun Bank Flash Japan manufacturing purchasing managers’ index (PMI) went down to an estimated 48.6 this month from 49.6 in August, according to S&P global which compiled the survey. 

It traced this month’s decline – the fastest decline since February – to the sustained weakness in output and new orders. 

“Forward-looking indicators from the survey suggest the potential for softening demand and activity over the coming months,” said Usamah Bhatti, economist at S&P Global Market Intelligence. “Composite new order growth came close to stalling, as private sector firms noted the weakest expansion since February.”

A reading below 50 signals deterioration from the previous month while an index above 50 indicates an overall improvement. The flash estimates serve as an early but accurate indicator of market activity released a week ahead of final data.

Slow new orders helped Japanese manufacturers catch up with their backlogs faster this month compared to August, although they continue to face price pressures.

Input price inflation quickened in September hitting a four-month high, which resulted in higher output charges although the rate of increase was around the same level with that of in August.