EconomicCalendar.com – August 23, 2016 – Japan’s manufacturing downturn showed signs of abating in August, as output expanded for the first time since February.
The Markit/Nikkei flash manufacturing purchasing managers’ index (PMI) came in at 49.6 in August, up from a final reading of 49.3 in July. The reading was roughly in line with the consensus estimate calling for a slight uptick to 49.5.
A PMI reading below 50 reflects contraction in economic conditions. August was the sixth consecutive month manufacturing PMI was below that level.
The flash PMI report reflects approximately 85-90% of all survey responses. Markit/Nikkei will release the final report September 1.
The output sub-index rose to 50.6 in August from 49.4 in July, a positive development for a sector that has been stuck in negative territory all year long.
“Japan’s manufacturing sector edged closer to stabilisation in August, but the latest batch of PMI data gave a mixed picture overall,” IHS economist Annabel Fiddes said in a statement. “Encouragingly, output expanded for the first time in six months (albeit marginally), while companies also saw softer reductions in total new work and export sales.”
Japanese policymakers are reevaluating their stimulus efforts as the economy continues to sputter. Analysts are expecting a new stimulus drive later this year, reflecting Prime Minister Shinzo Abe’s pre-election promise.
The Bank of Japan (BOJ) is expected to make bold moves in September, according to one of Prime Minister Abe’s advisers.
“However they conduct the assessment, there is already an answer: Monetary policy hasn’t been eased enough,” Esturu Honda said, as quoted by various news sources.
The BOJ’s next meeting is scheduled September 20-21.
Monetary policy makes up one of the prime minister’s “three arrows” alongside fiscal policy and structural reforms. This so-called Abenomics program has faced intense scrutiny over the past two years for its inability to produce timely results.
A spate of Japanese data releases are scheduled this week. On Wednesday the Cabinet Office will release the leading economic index and coincident index for June. Both indicators measure various components of the Japanese economy.
Tokyo’s Statistics Bureau will release a batch of inflation figures on Thursday. Japan’s deflationary spiral is expected to enter its fifth consecutive month in July. The annual CPI rate fell at an annualized 0.4% pace in June. Core inflation fell 0.5% annually in June following a 0.4% drop the prior month.