TOKYO, (Reuters) – - Japanese manufacturing activity contracted in March at the same pace as in February and output shrank the most in almost three years as China’s economic slowdown contributed to slack demand, a private business survey showed on Friday.
The Flash Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) was a seasonally adjusted 48.9, the same as February’s final reading.
The index was below the 50 threshold that separates contraction from expansion for the second consecutive month.
“Slack demand from domestic and international markets prompted the sharpest cutback in output volumes for almost three years,” said Joe Hayes, economist at IHS Markit, which compiles the survey.
“Concern of weaker growth in China and prolonged global trade frictions kept business confidence well below its historical average in March.”
The output component of the PMI index was a preliminary 46.9 in March, falling from a final 47.4 in February to reach the lowest level since May 2016.
The flash index for total new orders – domestic and foreign – fell at the fastest pace since June 2016, the survey showed.
For export orders only, the flash index showed the fastest decline since January.
The United States and China will resume face-to-face talks next week, but it is unsure if the two sides can narrow their differences and end the trade war between the world’s two largest economies.
Washington and Beijing have slapped import duties on hundreds of billions of dollars worth of each other’s products in their dispute, which has hurt global trade and caused China’s huge manufacturing sector to slow.
Japan is exposed to the dispute as it ships to China big volumes of electronics items and heavy machinery used to make finished goods destined for the United States.
(Reporting by Stanley White; Editing by Richard Borsuk)