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Investing.com-- Japanese manufacturing activity shrank more than expected in September, purchasing managers index data showed on Wednesday, as overseas demand was pressured by high U.S. trade tariffs.
Service sector activity remained strong and largely offset a downturn in manufacturing, although overall Japanese business activity still grew at its slowest pace in four months.
The S&P Global Flash Japan Manufacturing PMI fell to 48.4 in the first three weeks of September, missing expectations of 49.5 and also retreating from the 49.7 seen in the prior month. A print below 50 indicates contraction in the sector.
S&P analysts said the deterioration was in part driven by some caution over domestic inventory policies, while export demand also remained on the backfoot.
Japanese manufacturing activity has steadily declined this year, pressured primarily by softer exports as high U.S. trade tariffs weighed on overseas demand. Automobiles and steel were among the worst hit by higher tariffs.
The S&P Global Flash Japan Services PMI grew 53.0 in September, slightly slower than the 53.1 seen in August but comfortably in growth territory. Domestic and overseas services demand remained strong, given that the sector is also far less exposed to trade tariffs.
Strength in services saw the S&P Flash Japan Composite PMI output index rise 51.1 in September, keeping it in expansion territory. But growth was at its slowest pace in four months.