Japan: Manufacturing PMI falls in July to signal worsening operating conditions
The au Jibun Bank Japan Manufacturing Purchasing Managers’ Index (PMI) fell to 49.1 in July from the neutral 50.0 mark in June. As a result, the index moved below the 50.0 no-change threshold, and signaled a deterioration in manufacturing-sector operating conditions compared to the previous month.
The decline in the Manufacturing PMI was primarily driven by a renewed contraction in production levels and a significant decrease in new order volumes. This was attributed to subdued demand from both domestic and international markets. Firms were able to address their outstanding business more effectively thanks to the weaker demand environment, leading to a notable depletion in backlogs of work.
On the pricing front, Japanese manufacturers experienced a stronger rate of input price inflation, with cost burdens rising at the steepest rate since April 2023. This increase in costs was largely due to higher prices for raw materials, labor, oil, and logistics. Finally, business sentiment among Japanese manufacturers deteriorated, reflecting concerns over the overall economic environment and its impact on the manufacturing sector’s future health.