TOKYO, (Reuters) - Japanese manufacturing activity in August expanded at the fastest pace in seven months as domestic orders rose, a revised survey showed on Tuesday, providing hope that household demand might offset the hit to the economy from frail growth in China.
The Markit/Nikkei Japan Final Manufacturing Purchasing Managers Index (PMI) stood at a seasonally adjusted 51.7 in August, slightly below a preliminary reading of 51.9 but above a final 51.2 in July.
The index remained above the 50 threshold that separates expansion from contraction for the fourth straight month and showed activity expanded at the fastest pace since January.
The index for new orders rose to 53.4, more than a preliminary 53.2 and a final 50.9 in the previous month, which suggests domestic demand is picking up strength.
The final index for new export orders was 51.6, more than the flash reading of 50.5 but still down from 52.2 in the previous month, as global demand sagged due to a slowdown in China.
Output growth also slowed from both the preliminary reading and final number in July, but the overall survey suggests Japanese factories might be starting to benefit from a bounce in domestic consumption even as a shaky Chinese economy remains a drag on exports.
This would bode well for July-September gross domestic product after the economy contracted an annualized 1.6 percent in the second quarter as exports slumped and consumers cut back spending.
On Monday, data showed Japan’s industrial output unexpectedly contracted in July, so policy makers will hope that domestic demand would pick up the exports slack and keep the economy on track without the need for additional near term stimulus.
Reporting by Stanley White; Editing by Shri Navaratnam