August 21, 2014 / 1:40 AM / 3 years ago

Japan Aug flash PMI shows manufacturing accelerated as orders grow

TOKYO, Aug 21 (Reuters) - Japanese manufacturing activity accelerated in August as export and domestic demand increased, a preliminary survey showed on Thursday, offering hope that economic growth is getting back on track after slumping in the wake of a sales tax increase in April.

The Markit/JMMA flash Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 52.4 in August, up from a final reading of 50.5 in July.

The index remained above the 50 threshold that separates expansion from contraction for the third straight month and showed the fastest expansion since March.

The figures could ease fears that manufacturers would scale back production after seeing inventories pile up following the tax hike.

The output component of the flash PMI index rose to 53.2 from a final 49.8 in July.

The new orders index surged to 54.4 from 51.2, indicating domestic demand is picking up momentum.

The index for new export orders also rose to a preliminary 53.0 from 50.8 in July, showing that Japan’s economy could get an added boost as overseas demand strengthens.

Employment also rose at a faster rate.

Data on Wednesday showed Japan’s exports rose in July for the first time in three months in a tentative sign that global demand is starting to recover, raising hopes that exports can offset sluggish consumer spending.

The economy shrank an annualised 6.8 percent in April-June, its biggest slump since the March 2011 earthquake, stoking fears that consumer spending had weakened more than expected due to the April tax hike.

While a bounce was expected in the second half of the year as the impact of the tax increases fades and consumers start buying again, the plunge in GDP and uncertain export outlook have cast doubt on the strength of such a recovery.

The flash PMI index is based on approximately 85 to 90 percent of total survey responses each month, and is the earliest available indicator of manufacturing sector operating conditions in Japan.

The final Markit/JMMA PMI for August will be released on September 1. (Reporting by Stanley White; Editing by Kim Coghill)

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