Japan manufacturing activity shrinks for fourth month in August: PMI

TOKYO (Reuters) - Japanese manufacturing activity declined for a fourth straight month in August amid flagging demand, a revised business survey showed on Monday, underlining a darkening outlook for the world’s third-largest economy.

FILE PHOTO: Employees work at an assembly line in Iwaki city, Fukushima prefecture, Japan, April 5, 2016. REUTERS/Yuya Shino/File Photo

The final Jibun Bank Japan Manufacturing Purchasing Managers’ Index (PMI) edged down to a seasonally adjusted 49.3 from 49.4 in July, and also off a preliminary 49.5.

The index stayed below the 50.0 threshold that separates contraction for a fourth month, marking the longest run of shrinkage since a six-month stretch from March to August 2016.

“Japanese goods producers continued to signal difficult conditions during August,” said Joe Hayes, economist at IHS Markit, which compiles the survey.

“The sector was plagued by production cutbacks and flagging demand, which have been the trends so far in 2019. Softer growth across Asia, particularly in China, was reported to have dented export opportunities.”

Output and total new orders continued to decline.

While an index of new export orders rose to the highest since March, it remained in contraction for the ninth month, the longest such run since an 11-month spell from April 2012 to February 2013.

Manufacturers reported the end of a construction spike ahead of the 2020 Tokyo Olympic Games and a scheduled sales tax hike in October are expected to adversely impact output volumes the coming months.

Companies cut prices of their goods for a third straight month, citing client requests for discounts and weak market conditions.

More positive news came from Japan’s factory output, with data on Friday showing production bounced more than expected in July, though it was expected to fall again next month, signaling further strains ahead.

In another bright spot, the final reading for backlogs of work rose to its highest since December last year, though it still showed a decline and some firms said operating capacity eased as a result of slower inflows of new business.

“With external and domestic headwinds aplenty, it is difficult to envisage any near-term improvements in Japan’s manufacturing sector,” IHS Markit’s Hayes said.

Reporting by Daniel Leussink; Editing by Kim Coghill