Key facts
- Japan's manufacturing sector expanded in August, with the PMI rising to 55.1.
- New orders increased at their fastest pace since January 2018.
- Strong demand from semiconductor and AI-related industries contributed to growth.
- Manufacturers reported the steepest rise in total sales and overseas demand in over eight years.
- Business confidence reached its highest point since February.
Japan's manufacturing sector showed expansion in August, with new orders rising at their quickest pace since January 2018, according to preliminary data from S&P Global.
The S&P Global Flash Japan Manufacturing Purchasing Managers' Index (PMI) climbed to 55.1 in August from 54.5 in July, surpassing the 50-mark threshold that indicates growth.
Manufacturers experienced the sharpest increases in both production and new orders, with total sales and overseas demand seeing their steepest rise in over eight years. This surge was attributed to robust demand from the semiconductor and AI-related sectors. Employment growth in manufacturing also led the overall increase in jobs during August, and firms expanded their purchasing of inputs.
Meanwhile, the services sector also strengthened, with the S&P Global Flash Japan Services PMI Business Activity Index rising to 52.3 from 51.2. This helped lift the Composite Output Index to 53.4, its highest level since February.
Cost pressures eased across the private sector, with input inflation reaching a five-month low. However, selling prices for goods and services continued to rise at one of the steepest rates on record. Business confidence improved significantly, reaching its highest point since February, with manufacturers expressing more optimism than service sector firms due to expectations of higher sales and improved market conditions.