Japan’s manufacturing sector on a roll

The Japanese manufacturing sector continued to experience improving operating conditions during August, with output, new orders, and employment registering expansion. As per the price data available, inflationary pressures continued to dissipate, with input costs rising to the slowest degree of 2017 so far. Output charges were increased only slightly as a result. The headline Japan Manufacturing Purchasing Managers’ Index (PMI – a composite single figure indicator of manufacturing performance) was little changed during August at a level of 52.2 (July: 52.1).
 
Underpinning the ongoing expansion of the sector was a further increase in manufacturing output, the 13th in as many months. The rate of expansion was solid, and the best recorded since May. Overall, new work increased during August for the 11th successive month amid reports of higher domestic and international demand. New export orders rose modestly with manufacturers noting higher sales to clients based in China. 
 
Purchasing activity was also increased during August as companies bought inputs to service higher production requirements. However, there were reports of an imbalance between the supply and demand of inputs, especially metals and electronics. Input prices were also higher, although the rate of inflation was the lowest recorded in 2017 so far. Output charges were increased only fractionally as a result. Finally, business confidence remained inside the positive territory during August.