Japan’s manufacturing sector extended its expansion in August, helped by robust semiconductor and AI-related demand, while export orders and hiring also strengthened.
Japan’s manufacturing sector gained momentum in August, with new business expanding at its fastest pace since January 2018 as strong demand for semiconductors and artificial intelligence-related products supported factory activity, a business survey showed on Tuesday.
The S&P Global Japan Manufacturing Purchasing Managers’ Index rose to 54.9 in August from 54.5 in July, marking its highest level since April. Although the reading was below the flash estimate of 55.1, it marked the eighth consecutive month of expansion. A reading above 50 indicates growth, while one below 50 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.
Factory output also increased for an eighth consecutive month. While the pace eased slightly from July’s near 12-year high, it remained the second-fastest since February 2014. Improved market conditions, new product launches and higher incoming orders supported production.
Export demand strengthened as well, with new export orders rising at their fastest pace since the beginning of 2018. Manufacturers reported stronger demand from North America, Southeast Asia and China.
The improvement in factory activity was accompanied by continued hiring. Manufacturers increased staffing levels for a 21st consecutive month, with the pace of job creation reaching its fastest level since February 2018.
More from BusinessBacklogged work also rose for an eighth straight month, with the rate of accumulation the second-fastest since February 2014, suggesting that manufacturers continued to face a strong flow of new orders.
Cost pressures showed some signs of easing. Input price inflation slowed for a second consecutive month to its weakest level since March, while selling-price inflation moderated to its lowest level since April.
Despite the easing, price pressures remained historically elevated. Higher raw-material and oil costs linked to the conflict in the Middle East, supply bottlenecks around the Strait of Hormuz and a weaker yen continued to weigh on manufacturers, Fiddes said.
Businesses also became more optimistic about the year ahead. Confidence climbed to a six-month high and remained above its long-run average, with companies citing stronger market conditions, new product launches and sustained demand for semiconductors and AI-related technologies.
