TOKYO (Reuters) -Japan’s manufacturing activity shrank in October at the fastest pace in 19 months, hit by slumping demand in the key automotive and semiconductor sectors, a private-sector survey showed on Tuesday.
The S&P Global Japan Manufacturing Purchasing Managers’ Index (PMI) slipped to 48.2 in October from 48.5 in September, undershooting the flash reading of 49.3 and hitting the lowest since March 2024.
The headline index has remained below the 50.0 mark that separates growth from contraction for four consecutive months.
New orders dropped at the quickest pace in 20 months, driven by constrained client budgets and weak demand, the survey found. Export orders continued to fall for a 44th month, particularly from Asia, Europe and the United States, but the rate of contraction was the slowest since March.
“Demand weakness, particularly in the automotive and semiconductor sectors, weighed on the Japanese manufacturing industry,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.
Despite reduced demand, the drop in production output was less severe than in September, as manufacturers adjusted to shortages in new work, according to the survey.
Input cost inflation accelerated to a four-month high, driven by rising expenses in labour, materials and transportation. Firms’ output prices rose to a three-month high as they rushed to protect profit margins in response.
Japanese consumer inflation has been accelerating, government data on prices in Tokyo showed on Friday, keeping the Bank of Japan under pressure after it kept interest rates steady at 0.5% at last week’s policy meeting.
Manufacturers’ outlook for output turned more optimistic in October, supported by hopes for new products, growing AI adoption and auto and semiconductor sector recoveries as global trade conditions normalise, the PMI survey showed.
“They generally hope that new product releases will be successful and that the detrimental impact of U.S. tariffs will fade,” De Lima noted.
(Reporting by Kantaro Komiya; Editing by Sam Holmes)
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