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2025-08-01 08:47:37
Japan's Manufacturing Activity Returns to Contraction in July: A private sector survey released Friday showed that Japanese manufacturing activity contracted in July, ending a brief period of stabilization the previous month as weak demand pushed production back into contraction. The S&P Global Japan Manufacturing Purchasing Managers' Index (PMI) fell to a final reading of 48.9 in July from 50.1 in June, below the 50.0 threshold that separates expansion from contraction. The final PMI reading was little changed from the initial reading of 48.8. Most of the survey data was collected before the announcement of the US-China trade agreement last Sunday, which reduced tariffs on Japan to 15% from the previously threatened 25%. Annabel Fiddes, Associate Director of Economics at S&P Global Market Intelligence, noted that with the US-Japan trade agreement taking effect, "whether this translates into stronger customer confidence and improved sales in the coming months will be crucial." The key output sub-index re-entered contraction territory, shrinking at the fastest pace since March. The survey showed that businesses generally reported lower production due to a decline in new business. New orders contracted again in July, but at a slightly slower pace than in June. Despite declines in production and orders, manufacturers continued to add workers in July, but the pace of job creation slowed to its lowest level in three months. On the price side, input cost inflation fell to its lowest level in four and a half years, while output prices rose at their fastest pace in a year as businesses passed on higher costs to customers. Business confidence rose to a six-month high in July, with companies expecting improved demand conditions and reduced trade-related uncertainty to support growth over the coming year.
