September 29, 2008 / 11:18 PM / 11 years ago

Japan manufacturing PMI slips to 6-½ yr low

(For accompanying table double click on [ID:nTKX003036])

TOKYO, Sept 30 (Reuters) - Manufacturing activity in Japan fell to its lowest point in 6-½ years in September as companies recoil amid an uncertain economic outlook and financial market turmoil.

For the seventh month in a row, the Nomura/JMMA Japan Purchasing Managers Index, which gives an early snapshot of the health of manufacturing, pointed to a contraction, with the outlook also weak.

“The overall health of the Japanese manufacturing sector remained fragile,” said Alex Hamilton, an economist at research firm Markit, which polled more than 400 companies for the survey.

“Current turmoil in global financial markets suggests that a quick recovery for the sector seems unlikely,” he said.

The weak reading bodes ill for the Bank of Japan’s tankan quarterly corporate survey due out on Wednesday, which will give companies’ assessment of business conditions and their outlook for profits and capital spending. [ID:nT124670]

The PMI declined to a seasonally adjusted 44.3 in September from 46.9 in August, pushing it further below the 50-point mark that points to a contraction in manufacturing.

The PMI’s output index, which approximates industrial production, fell to 40.9 in September from 43.7 in August, marking the lowest reading since December 2001, when it logged 37.7.

Respondents to the survey said weak demand and sluggish global market conditions prompted them to curb production.

Preliminary government data for industrial production for August is due out at 8:50 a.m. on Tuesday (2350 GMT Monday).

Japan’s trade balance fell into deficit in August, as exports to the United States posted their sharpest fall from a year earlier. It was the first negative figure since 1982 except for January, when exports usually drop due to new year holidays. [ID:nT139700]

In the PMI survey, the new orders index, a barometer of future demand that combines goods orders from both home and abroad, also slipped to a near-seven-year low of 39.6 from 44.1 in August.

Companies’ business costs continued to rise in September with the input prices index at 68.3. It has stayed above the 50 mark since 2004.

However, the index declined markedly from 78.4 in August as oil prices have headed south since July.

The output prices index, meanwhile, rose to 58.1 in September from 55.8, signalling that companies are raising prices to protect profit margins.

Japan’s core consumer price index (CPI), which excludes fresh fruit, vegetables and seafood but includes oil products, rose 2.4 percent in August from a year earlier, government data showed last week, matching the pace of rises in July, which was the highest in a decade. [ID:nT213947]

Companies’ staffing conditions continued to be weak with the employment index below the 50 mark for the second consecutive month at 46.9, well under 49.8 in August and the lowest level since February 2003, when it was 45.8.

The report pointed to declining output volumes and bleak economic prospects as reasons behind shrinking employment.

Employment data is due out at 8:30 a.m. on Tuesday (2330 GMT Monday). (For more stories on Japan’s economy click [ID:nECONJP]) (Reporting by Yuzo Saeki; Editing by Michael Watson)

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