Key facts
- Japan's manufacturing PMI increased to 54.9 in August, up from 54.5 in July.
- New business growth in Japan's manufacturing sector reached its highest point since January 2018.
- Export orders for Japanese manufacturers saw their quickest rise since the start of 2018.
- South Korea's factory sector recorded a ninth consecutive month of activity growth in August, with PMI at 52.3.
- Robust export demand, particularly for semiconductors and AI products, is driving growth in both economies.
Japan's manufacturing sector demonstrated a significant pickup in August, with new business growth accelerating to its fastest pace since January 2018, according to a survey by S&P Global. The Japan Manufacturing Purchasing Managers' Index (PMI) rose to 54.9 from 54.5 in July, marking the eighth consecutive month of expansion.
This growth was primarily driven by robust demand for semiconductors and AI-related products. Output also increased for the eighth consecutive month, with the pace being the second-fastest since February 2014. Export orders experienced their quickest rise since the start of 2018, with notable demand from North America, Southeast Asia, and China.
Manufacturers expanded their workforce for the 21st consecutive month, with job creation accelerating to its fastest rate since February 2018. Backlogged work continued to accumulate. Cost pressures eased for the second month, with input and selling price inflation slowing, though remaining historically elevated due to factors like higher raw material and oil costs, and a weak yen.
Overall business confidence for the year ahead improved, reaching a six-month high, as companies expressed optimism about market conditions and demand for technology. Annabel Fiddes, economics associate director at S&P Global Market Intelligence, highlighted the sector's strong positioning, particularly due to AI-related demand.
Meanwhile, South Korea's factory sector recorded its ninth consecutive month of activity growth in August, with the PMI at 52.3, down from 53.1 in July. While overall new order growth eased, export demand saw its strongest increase since November 2020, benefiting from the AI and semiconductor supercycle. Asia's fourth-largest economy grew faster than expected in the second quarter, largely due to a semiconductor export boom.