Japan factory growth slows in September as domestic demand moderates

TOKYO: Japan’s private-sector activity continued to expand in September, although the pace of growth moderated as manufacturing output and new orders softened, according to the latest S&P Global PMI survey.

The S&P Global Japan Composite PMI fell to 52.5 from 53.5 in August, marking the weakest expansion since May. The reading nevertheless remained above the 50-point threshold separating expansion from contraction.

Manufacturing activity was a key factor behind the moderation, with the S&P Global Japan Manufacturing PMI easing to 54.1 from 54.9. Growth in both output and new orders slowed, suggesting that domestic demand had lost some momentum

Factory growth

However, external demand continued to provide support, with new export orders maintaining solid growth. The resilience in overseas demand is expected to remain important for Japanese manufacturers as domestic consumption faces a more subdued environment.

Services activity also expanded at a slower pace. The Services PMI declined to 51.6 from 52.5, although employment continued to increase. Private-sector hiring reached its fastest pace in seven months, indicating that businesses remained willing to expand their workforce despite the moderation in activity.

Business confidence, meanwhile, improved to its highest level since February. Expectations of sustained demand from artificial intelligence-related industries, semiconductors, defence and automotive sectors were reported to have supported sentiment.

Energy prices

Cost pressures remained a concern, with higher energy and raw material prices continuing to raise input costs. Middle East tensions and weakness in the Japanese yen were also contributing to higher costs for businesses.

The latest data suggest that Japan’s economy remains on an expansionary path, supported by export demand and technology-related industries. However, softer domestic demand and persistent input-cost pressures could continue to moderate growth momentum in the coming months.

#businessnews