- Amy Brownbill, Markit economist
Activity in Japan's manufacturing sector rose at the fastest pace in seven months in August as domestic orders increased, suggesting the world's third biggest economy is recovering after a contraction in the second quarter. The Markit/Nikkei Japan Flash Manufacturing Purchasing Managers Index climbed to a seasonally adjusted 51.9 in August from a final 51.2 in July. The gauge stayed above the 50 threshold that separates expansion from contraction for the fourth consecutive month and showed activity expanded at the fastest pace since January. The sub-index for new orders surged to a 53.2 from a final 50.9 in the preceding month, also showing the fastest growth in seven months, and suggesting domestic demand is improving. Nevertheless, the flash index for new export orders slipped to 50.5 from 52.2 a month before, indicating demand from abroad is losing steam as China's economy slows. The output component of the PMI index also dropped to a preliminary 51.9 from a final 52.2 in July.
Japan's economy contracted 1.6% in the three months through June as exports plunged and consumers remained reluctant to spend. However, the economy is predicted to resume growing in the current quarter if consumer spending recovers, but ongoing export weakness could hinder the strength of the rebound.
© Dukascopy Bank SA