Japan's manufacturing health worsens for 3rd month in a row in Sept

Employment levels rose at the softest rate in the current sequence. On the price front, average operating expenses remained historically elevated, yet firms only partially passed these higher costs on to clients. Output charges rose at the softest rate since mid-2021.

At 49.7 in September, the headline manufacturing PMI dipped fractionally lower from 49.8 in August to indicate a slight decline in overall operating conditions, S&P Global Market Intelligence said in a release.

Output fell for the second time in three months at the end of the third quarter, with the respective seasonally-adjusted index only fractionally below the neutral 50 threshold.

Firms often indicated a lack of incoming new business as a result of economic weaknesses. However, this was partially offset by firms opting to complete outstanding orders. As a result, backlogs of work fell at moderate pace that extended the current sequence of depletion to two years.

The level of new orders placed with Japanese manufacturers also fell in September, and at a moderate pace that was little changed from that in August.

Firms attributed a stagnating economy and staff shortages to drop in sales. International demand was also subdued, as new export sales contacted at a solid rate that was the strongest since March.

Japanese manufacturers continued to raise employment levels during the latest survey period. The rate of job creation was fractional and the softest in the current seven-month sequence.

Input inventories were also raised in September, following two consecutive monthly reductions as firms held pre-production inventories in preparation for an eventual demand recovery.

Similarly, manufacturers also raised input purchases slightly. There was evidence however that vendor performance worsened in September, as indicated by a renewed lengthening in delivery times that was the most pronounced for seven months.

Inflationary pressures remained elevated across Japan's manufacturing industry. Firms mentioned higher labour, logistics and raw material prices had been key factors behind higher cost burdens.

Positively, the rate of inflation eased from August to reach the lowest for five months. Firms opted to partially pass these higher costs to clients in the form of raised output charges. The rate of output price inflation eased, however, and was the slowest seen since June 2021.

Business confidence remained positive in September, reflecting expectations that the demand and mass production of new products would be successful.

Firms were also hopeful for a wider economic recovery. The degree of confidence eased from August, however, and slipped to the lowest since December 2022.

Fibre2Fashion News Desk (DS)