Key facts
- Japan's manufacturing PMI fell to 54.1 in September from 54.9 in August.
- Factory output and new orders growth softened in September.
- New export orders remained strong, indicating robust overseas demand.
- Manufacturing employment growth was solid, contributing to the fastest private-sector payroll expansion in seven months.
- Business confidence among manufacturers hit its highest level since February.
- The composite PMI, which includes services, slowed to 52.5 in September.
Japan's manufacturing sector experienced a slowdown in growth during September, as indicated by the S&P Global flash Japan Manufacturing Purchasing Managers' Index (PMI) which decreased to 54.1 from 54.9 in August. A reading above 50.0 signifies an expansion in activity. The slowdown was attributed to softer factory output and new orders, although both sub-indices remained in expansionary territory for the ninth consecutive month. New export orders continued to be a positive factor, buoyed by sustained global demand. The manufacturing employment sub-index showed a solid gain, contributing to the fastest pace of private-sector payroll growth in seven months. Manufacturers expressed increased confidence in their business outlook, reaching the highest level since February, with expectations of continued demand from sectors such as AI, semiconductors, defense, and automobiles. The services sector also saw a deceleration, with its PMI falling to 51.6 from 52.5 in August. Consequently, the composite PMI, which aggregates manufacturing and services, declined to 52.5 in September, marking the slowest expansion since May. Cost pressures for Japan's private sector eased slightly but remained historically high, driven by a weak yen, rising energy and raw material prices due to the Middle East conflict, and increased labor and transportation expenses.