Japan’s private-sector growth slowed in September, with PMI Manufacturing easing from 54.9 to 54.1, PMI Services from 52.5 to 51.6, and PMI Composite from 53.5 to 52.5. Manufacturing output also moderated from 56.1 to 54.9. The Composite remained in expansion for an eighteenth consecutive month, but the pace of growth fell to a four-month low as both manufacturing and services recorded slower increases in activity and new orders.
The slowdown was concentrated in domestic demand rather than exports. Overall new-order growth weakened, with S&P Global saying softer domestic demand was the main drag. By contrast, new export orders continued to rise at the same marked pace as August’s eight-and-a-half-year high, driven entirely by manufacturing, while services export demand fell again. Employment provided another positive signal, rising at the fastest pace in seven months, while business confidence strengthened to its highest since February amid optimism around AI-related demand, semiconductors, defence and automobiles.
Inflation pressures eased only marginally. Input-cost inflation slipped to a four-month low but remained historically sharp, with firms citing higher energy and raw-material costs linked to the Middle East conflict and the weak Yen, alongside rising staff and transport expenses. Selling prices increased at a rate only slightly below August’s survey record. S&P Global’s Annabel Fiddes said growth had “slipped down a gear,” but the persistence of high costs means Japan is still facing a combination of softer domestic momentum and elevated price pressure, rather than a clean slowdown accompanied by meaningful disinflation.
Data Summary
| Indicator | September | August | Trend |
|---|---|---|---|
| PMI Manufacturing | 54.1 | 54.9 | Slower expansion |
| PMI Services | 51.6 | 52.5 | Four-month low |
| PMI Composite | 52.5 | 53.5 | Four-month low |
| Manufacturing Output | 54.9 | 56.1 | Three-month low |
Japan’s private-sector expansion continued in September, but momentum weakened across both manufacturing and services.
Components
| Component | Trend |
|---|---|
| New orders | Slower overall growth |
| Domestic demand | Softer; main drag on momentum |
| New export orders | Continued marked growth; unchanged from August’s eight-and-a-half-year high |
| Manufacturing exports | Main source of export strength |
| Services exports | Continued decline |
| Employment | Fastest growth in seven months |
| Backlogs | Fastest increase in seven months |
| Business confidence | Highest since February; above series average |
| Input costs | Eased to four-month low but remained historically sharp |
| Selling prices | Slowed only slightly from August’s survey record |
| Supply chains | Vendor delivery times lengthened substantially amid shortages |
The release points to weaker domestic momentum but resilient external demand, hiring and confidence, alongside still-elevated cost pressures.
Key Takeaways
- Japan’s private-sector growth slowed to a four-month low, with both PMI Services and PMI Composite easing in September.
- The slowdown was driven mainly by softer domestic demand, while manufacturing export orders remained robust.
- New export orders continued expanding at the same marked pace as August’s eight-and-a-half-year high, though the strength was concentrated in manufacturing.
- Employment rose at the fastest pace in seven months, while backlogs also increased at the quickest rate in seven months.
- Business confidence strengthened to its highest since February, supported by optimism around AI, semiconductors, defence and automobiles.
- Inflation pressure remained elevated despite some easing, with firms citing the weak Yen, Middle East conflict, energy, raw materials, staff and transport costs.
- Selling-price inflation slowed only slightly from August’s survey record, showing that softer growth has not yet produced meaningful disinflation.
