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Japan’s manufacturing activity continued to expand for a 10th straight month, but weaker output and new orders weighed on growth. Rising input costs and softer export demand added to concerns, even as AI-driven demand and new product launches lifted business optimism.
Japan’s manufacturing sector expanded at its slowest pace in seven months in October as factory output and new orders lost momentum, while rising input costs added to pressure on businesses, a private-sector survey showed on Monday.
The S&P Global Japan Manufacturing Purchasing Managers’ Index (PMI) eased to 53.3 in October from 54.1 in September. A reading above 50 indicates expansion, while a figure below that level signals contraction.
Despite the slowdown, manufacturing activity remained in expansion territory for the 10th consecutive month, supported by stronger demand for semiconductors and artificial intelligence-related products.
Factory output increased for the 10th straight month, although the pace of growth was the weakest since March. New orders also continued to rise for a 10th consecutive month, but their growth slowed to a seven-month low.
Phil Smith, economics associate director at S&P Global Market Intelligence, said Japanese manufacturers had struggled to sustain the stronger growth rates recorded earlier in the year. However, he noted that the sector was still expanding at a decent pace by historical standards.
Overseas demand remained supportive, although export order growth weakened to its slowest pace since March. Manufacturers reported stronger demand from markets across Asia, including China, as well as North America, Africa and the Middle East.
More from BusinessEmployment growth remained steady and close to its fastest pace in eight-and-a-half years. Meanwhile, manufacturers reported a faster accumulation of outstanding work, with some businesses also facing delays in input deliveries.
Cost pressures emerged as a key concern in October. Input price inflation accelerated, prompting companies to increase their purchasing inventories at the fastest rate in nearly four years as they sought to protect themselves against further price increases.
However, manufacturers’ selling price inflation eased to a six-month low, suggesting businesses were facing challenges in passing higher costs on to customers.
Despite the moderation in activity, business confidence improved. Manufacturers’ optimism about the year ahead rose to an eight-month high, supported by expectations of new product launches, the artificial intelligence boom and the addition of new clients.
