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Japanese manufacturing activity showed signs of stabilizing in August

Japanese manufacturing activity showed signs of stabilizing in August, as corresponding index rose for the first time in six months. The Purchase Managers Index (PMI) rose by 0.3 points in August to 49.6 points, according to the seasonally adjusted data. The measure remains below 50 points, indicating that the sector is in contraction territory. The sub-index for production volume increased from 49.4 to 50.5 points for the reported month.

If final data confirm the values that would be the first increase since February. It is encouraging that the volume expands for the first time in six months, while companies reported smaller declines in new orders and export sales. However, they recorded a decline, forcing Japanese manufacturers to lower the prices of their goods with the sharpest rate since October 2012 in order to attract new customers.

In the second quarter, consumer spending slowed and exports shrank due to weak external demand and a strong JPY, which affected the growth of the economy.

This month, Japanese authorities announced a package of fiscal measures worth 13.5 trillion JPY (133.96 billion USD) in attempt to cope with external headwinds and maintain a moderate pace of recovery. The package focuses primarily on building new infrastructure, which could encourage capital spending and industrial production next year.

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