Japan’s manufacturing activity shrank in July, with the S&P Global Japan manufacturing PMI falling to 48.9 from 50.1 in June, below the growth threshold. Output and new orders contracted, but companies increased staffing. Input cost inflation eased, while output prices rose. Business confidence hit a six-month high, anticipating improved demand.

The trade deal with the U.S. lowered tariffs on Japan to 15%, potentially boosting client confidence and sales. Output fell sharply due to lower new business volumes. New orders decreased in July, but at a slower pace than in June. Job creation slowed, while input cost inflation eased and output prices rose.

Despite the decrease in production and orders, manufacturers increased staffing. Input cost inflation was at its lowest in four-and-a-half years, while output prices rose at the fastest rate in a year. Business confidence reached a six-month high, with firms expecting improved demand and reduced trade-related uncertainty to support growth.

Read more at Yahoo Finance: Japan’s factory activity slips back into decline in July, PMI shows