Japan’s Manufacturing PMI Dips More Than Anticipated in September, While Services Remain Strong

Japanese manufacturing activity experienced a greater decline than anticipated in September, as major automakers continued to face production interruptions. In contrast, the services sector saw an improvement fueled by robust consumer demand.

The manufacturing purchasing managers index (PMI) from au Jibun Bank registered at 49.6 in early September, falling short of expectations of 49.9 and also lower than the previous month’s figure of 49.8. A reading below 50 indicates a contraction, marking the third consecutive month of decline in the manufacturing sector. This downturn was primarily attributed to ongoing disruptions in automobile production, particularly related to a significant safety scandal affecting the country’s leading manufacturers.

Conversely, Japan’s services sector maintained strong growth, with the services PMI from au Jibun Bank rising to 53.9 in early September, up from 53.7 in August. This increase was largely driven by vigorous private consumption, following substantial wage hikes secured by labor unions earlier in the year.

According to Usamah Bhatti, an economist at S&P Global Market Intelligence, “The latest reading suggested that growth momentum was sustained throughout the third quarter of 2024, indicating a potentially stronger GDP reading for Q3.” Private spending has been instrumental in supporting Japan’s economic growth in recent quarters, aligning with the rise in consumer spending driven by increased wages.