Japan manufacturing growth slows sharply as export orders shrink

A container is loaded onto a cargo ship at a pier in Tokyo, on Feb 18, 2016.
A container is loaded onto a cargo ship at a pier in Tokyo, on Feb 18, 2016. PHOTO: AFP

TOKYO (REUTERS) - Growth in Japan's manufacturing activity slowed sharply in February as new export orders contracted at the fastest pace in three years, a worrying sign that overseas demand is deteriorating rapidly as China's economy slows, a preliminary survey showed on Monday (Feb 22).

The Markit/Nikkei Flash Japan Manufacturing Purchasing Managers Index (PMI) fell to 50.2 in February on a seasonally adjusted basis from a final 52.3 in January.

But it remained above the 50 threshold that separates contraction from expansion for the 10th consecutive month.

The sub-index for new export orders fell to a preliminary 47.9 from 53.1 in January, which would indicate the biggest contraction since February 2013 if confirmed in final data.

Exports in January tumbled by the most since the global financial crisis, in a clear indication that financial market turmoil and slowing emerging market economies have eroded demand abroad.

Under pressure from faltering global demand, total new orders from customers at home and overseas also changed direction and contracted, while job creation cooled to a five-month low.

Companies cut selling prices for the third month in a row, and more sharply than in January, likely reflecting both falling commodity prices and sluggish demand.

Japan's economy contracted more than expected in the fourth quarter due to weak household spending and exports.

While analysts expect a moderate recovery this year, stagnant wages, depressed consumer prices and faltering global growth have raised fresh doubts about Prime Minister Shinzo Abe's cocktail of stimulus policies aimed at re-energising the economy and quashing years of deflation.