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Growth at Japanese manufacturers softened to a three-month low in March as output and new orders increased at a slower rate.

The preliminary reading for the Nikkei-Markit purchasing managers’ index dropped to 52.6 last month, down from February’s reading of 53.3 and moving closer to the 50-point threshold that separates expansion from contraction.

Production grew at a slower rate, dragged lower by softer growth in new orders and a weaker rise in demand from abroad, according to the gauge’s sub-indices. While input costs rose at a slower pace, prices charged to clients fell into contraction.

Business confidence also fell to a four-month low, but remained in positive territory as the latest headline reading nonetheless marked the seventh straight month above 50. Paul Smith, economist at IHS Markit, which compiles the survey, said:

Although signalling a slower rate of expansion during March, the latest PMI data again point to a Japanese manufacturing economy expanding at a decent clip.Indeed, the data are consistent with manufacturing output expanding at an underlying trend rate of just below 2 per cent.

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