The pace of contraction in the Japanese manufacturing sector has slowed to a six month low during August, suggesting that things may be looking up for the economy after its record contraction last quarter. The final au Jibun Bank Manufacturing PMI climbed higher from 45.2 in July to a seasonally adjusted reading of 47.2 in the month of August.

The contraction rate not only showed signs of improvement since February but also managed to come in better than the preliminary reading of 46.6. However, overall output and new orders continued to shrink for the 16th month, keeping the sector under pressure and preventing factory activity from growing.

Japan’s manufacturing sector has been under pressure for over a year on account of the trade tensions between the US and China. Japan’s export-oriented economy was especially impacted by the trade war as China is its key trade partner.

Over the past few months, the coronavirus pandemic also added to the pressures faced by this sector as demand, both domestic and external, fell hard as a result of the lockdowns. Weak demand has forced factories to cut prices, further impacting the overall PMI reading.