Japan’s PMI data for August revealed a mixed yet overall positive picture for the economy. PMI Manufacturing inched up from 49.1 to 49.5, still indicating contraction but showing improvement. PMI Services increased from 53.7 to 54.0, signaling continued strong expansion in the service sector. As a result, PMI Composite, which combines both manufacturing and services, rose from 52.5 to 53.0, reflecting sustained overall growth.
Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, noted that the solid expansion of business activity at Japanese private sector firms continued into Q3. She highlighted that growth was largely driven by an acceleration in services activity, while manufacturing output returned to positive growth after a brief decline in July.
Pan pointed out that “overall optimism levels remained above average,” suggesting that firms are confident about growth in the months ahead. However, she also warned of rising “margin pressures” across both manufacturing and service sectors. This concern arises as overall selling price inflation dropped to its lowest level since November 2023, even though average input costs rose at the fastest pace in 16 months.
