Factory activity of Japan in September Shrunk the most in last 7 months

Factory activity of Japan in September Shrunk the most in last 7 months

In September, the manufacturing activity of Japan shrank at its fastest pace as compared to the last seven months, underscoring the widening economic impact of the trade dispute between China and the United States and also keeping the policymakers under pressure for stepping up stimulus.

The Purchasing Managers’ Index (PMI) of the Jibun Bank Flash Japan Manufacturing reduced to a seasonally adjusted 48.9 from the final 49.3 in the last month, marking the fastest deterioration pace since February.

The index has stayed below the threshold of 50.0 which separates contraction from the expansion for the 5th consecutive month, pressured by the combination of trade disputes, uncertainty of Brexit and the ongoing political upheaval in Hong Kong.

The key activity measures in the PMI survey has painted a depressing picture of the sectoe oof manufacturing, and will undoubtedly boost expectations for the Bank of Japan for adding to its massive stimulus.

The BOJ has already been moving in that direction. Last week, during its policy review, the central bank warned regarding the overseas risks and signaled the chance of greater measures for support as early as their next policy meeting in the month of October.

The PMI has shown that factory output as well as total new orders both are contracted for the 9th consecutive month, whereas the backlog of work has dropped to a level that had not been seen since the late 2012.

The compiler of the survey and economist at the HIS Markit, Joe Hayes said that Anecdotal evidence had further made prominent the strong external headwinds that the Japanese manufacturers were having to face, namely the trade tensions between China and the U.S., the protests in Hong Kong, Brexit and also the diplomatic dispute going on between Japan and South Korea.