Japan manufacturing PMI shrinks more than expected in Sept, services strong

Investing.com-- Japanese manufacturing activity shrank more than expected in September as major automakers continued to grapple with production disruptions, while services activity picked up on strong consumer demand. 

The au Jibun Bank manufacturing purchasing managers index read 49.6 in early-September, less than expectations of 49.9 and worse than the 49.8 seen in the prior month.

A reading below 50 indicates contraction, with the manufacturing PMI now having shrunk for a third consecutive month. Weakness in manufacturing was driven chiefly by persistent disruptions in automobile production, as the country’s biggest producers grappled with a growing safety scandal. 

But Japan’s services sector continued to expand at a strong pace, with the au Jibun Bank services PMI rising 53.9 in early-September, picking up from the 53.7 seen in August. 

Demand for services was driven chiefly by strong private consumption, after Japanese labor unions won bumper wage hikes earlier this year. 

“The latest reading indicated that growth momentum was sustained throughout the third quarter of 2024, and hints at a stronger Q3 GDP reading,” Usamah Bhatti, economist at S&P Global Market Intelligence said. 

Private spending has been a key driver of Japanese economic growth in recent quarters, as consumption picked up in tandem with increased wages.