The global economy continues to weaken most everywhere you look. The focus of this post is Japan where the Markit/JMMA Japan Manufacturing PMI™ shows Modest deterioration in operating conditions recorded in September.

Key points:

Output and new orders both down again, albeit at slower rates
Weaker underlying demand and strong yen impact on export orders
Charges cut at sharpest rate for over two years

Summary:

Operating conditions in Japan’s manufacturing sector continued to worsen at a modest pace in September. Output and new orders both fell amid reports of a general stagnation of economic activity in domestic and overseas markets. Manufacturers continued to deplete inventories, while they made further sharp inroads into their work outstanding. Payroll numbers were little changed.

On the price front, companies responded to the weaker demand environment by discounting their charges to a greater degree. These efforts were aided in part by a further modest reduction in input prices.

After adjusting for seasonal factors, the headline Markit/JMMA Purchasing Managers’ Index™ (PMI™) improved to a three-month high of 48.0 in September (August: 47.7) but, by remaining below the 50.0 no-change mark, again signalled a modest deterioration in operating conditions.

Production and new order volumes continued to decline on a monthly basis. Although slightly weaker than in August, rates of contraction remained marked, particularly in the investment goods sector.

Looking ahead, the widening rift between Japan and China over disputed islands certainly cannot help yet Voice of America reports there is No Sign of Progress in Dispute.

September 26, 2012
A bitter territorial dispute between China and Japan showed no signs of improvement Tuesday, as foreign ministers from both countries held high-level talks to ease tensions.

Relations have sunk to their lowest point in years, with anti-Japan protests breaking out across China and many Chinese refusing to buy Japanese-made goods. On Wednesday, Japanese automakers Toyota and Nissan said they are reducing production in China because of lessened demand.

[Foreign Minister Yang Jiechi] warned that bilateral relations could not “return to the track of sound and steady development” unless Japanese officials “take concrete measures to correct its mistakes.”

Mike “Mish” Shedlock
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