Japan Factory Growth Slows to Seven-Month Low in October, Flash PMI Shows

Growth in Japan’s manufacturing sector slowed to a seven-month low in October as output and new orders lost momentum, a flash survey from S&P Global showed on Friday, Reuters reported. The flash S&P Global Japan Manufacturing PMI fell to 53.3 from 54.1 in September, remaining above the 50.0 mark that separates expansion from contraction.

The reading came in below market forecasts of 54.5, according to Trading Economics. It was the slowest pace of factory expansion since March, with both output and new orders growing at their weakest rates in seven months.

Factory orders and exports ease

New orders received by goods producers rose at the weakest pace since March, and manufacturers recorded their smallest increase in output since the same month, Reuters said. New export business across the private sector grew at the softest rate in four months.

Factories continued to add staff at a moderate pace. Purchasing activity also increased, leading to the largest build-up in stocks of purchases in almost four years, while suppliers’ delivery times lengthened substantially, Trading Economics noted.

Services hold overall activity steady

Japan’s services sector picked up, with the flash S&P Global Japan Services PMI Business Activity Index rising to 52.0 from 51.3 in September. That left the flash composite PMI output index unchanged at 52.3, marking a 19th consecutive month of expansion in private-sector activity.

Usamah Bhatti, an economist at S&P Global Market Intelligence, said overall business activity growth across Japan was “unchanged from a month prior”, adding that growth remained weaker than the average seen so far this year, according to Reuters.

Across the private sector, new business rose at the slowest pace in three months, job creation slowed to a 14-month low, and business confidence for the year ahead fell to its lowest level since July.

On prices, input cost inflation accelerated slightly on higher raw material and labour costs, while inflation in output charges eased to a four-month low, the survey showed.

What’s next

The survey comes ahead of the Bank of Japan’s next policy meeting. Trading Economics said the central bank is widely expected to hold rates at that meeting, potentially paving the way for a hike in December, after data showed Japan’s headline and core inflation both rose 2.1% year-on-year in September, the highest in nine months.

Trading Economics’ model estimates the manufacturing PMI at 53.0 by the end of this quarter.

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