Japan manufacturing growth accelerates as AI demand lifts new orders: PMI

[TOKYO] Japan’s manufacturing sector picked up in August as new business grew at the fastest pace since January 2018 on solid demand for semiconductors and AI-related products, a business survey showed on Tuesday (Sep 1).

The S&P Global Japan Manufacturing Purchasing Managers’ Index (PMI) rose to 54.9 in August from 54.5 in July, its highest since April. While it was below a flash reading of 55.1, it marked the eighth consecutive month of expansion. A reading above 50 indicates expansion, while below that level signals contraction.

“Overall, the sector looks well placed to sustain its strong performance, particularly given demand linked to AI-related sectors,” said Annabel Fiddes, economics associate director at S&P Global Market Intelligence.

Output rose for an eighth straight month. The pace eased only slightly from July’s near 12-year record and was the second-fastest since February 2014, thanks to improved market conditions, new product releases and higher volumes of incoming work.

Export orders also increased at the quickest pace since the start of 2018 on stronger demand from North America, South-east Asia and China.

Manufacturers raised staffing levels for a 21st consecutive month, and the rate of job creation was the fastest since February 2018. Backlogged work increased for an eighth straight month, with the pace of accumulation the second-quickest since February 2014.

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Meanwhile, cost pressures eased for a second month, with input price inflation slowing to its weakest since March. Selling price inflation also softened to the lowest since April.

Price pressures remained historically elevated, however, with higher raw material and oil costs from the conflict in the Middle East, supplier bottlenecks around the Strait of Hormuz and a weak yen, Fiddes said.

Firms were more optimistic about the year-ahead outlook, with confidence rising to a six-month high and staying above the long-run trend. Companies attributed the positive sentiment to stronger market conditions, new product launches and demand for semiconductors and AI-related technology. REUTERS