The reading is still well above the 50 line, so the story is slower growth rather than a downturn, but the drop to a six-month low in a sector reliant on overseas demand will keep attention on how long export strength can last. Sharp cost increases tied to energy, transport and a weak yen, with the Middle East war cited by firms, show that oil and currency moves are still feeding straight into factory prices. Persistent selling price increases are also relevant to the Bank of Japan's assessment of inflation. References to semiconductors and AI-related demand will matter for Asian chip and technology shares, while shortages of electronic components are a risk to output. This is a single survey, so traders will want confirmation from other activity data.---Earlier:Japanese firms expect consumer prices to rise 2.6% a year from now, down from 2.7%BOJ opinions show members open to faster hikes if inflation risks overshooting 2% target---Japanese factories are still expanding strongly, but slower orders, supply shortages and persistent cost pressure show that momentum is softening from August's high.Summary:The S&P Global Japan Manufacturing PMI slipped to 54.1 in September from 54.9 in August, its lowest in six months but still a solid expansion.Output rose at the slowest pace in three months, and new order growth eased from August's multi-year record to its slowest since May.New export orders rose sharply, close to August's eight-and-a-half-year high, and employment rose at the second-fastest rate since April 2018.Supplier delivery delays were among the steepest in four years, with shortages of electronic components and AI-related technology widely cited.Input cost inflation edged down to a six-month low but stayed rapid, and selling prices rose at one of the quickest rates since late 2022.Manufacturers remain confident that output will rise over the next year, with semiconductor and AI-related demand cited.Japan's manufacturing sector kept expanding strongly in September, but momentum softened, with the S&P Global Japan Manufacturing PMI slipping to 54.1 from 54.9 in August, its lowest reading in six months. A reading above 50 signals expansion, so the index still points to a solid improvement in the health of the sector.Output rose at the slowest pace in three months, and while new orders kept growing at a historically strong pace, the rate eased from August's multi-year record to its slowest since May. Some firms linked the slowdown to clients adjusting inventories as earlier stockpiling began to unwind, while some companies said sales had been weaker than expected. New export orders rose sharply, with growth close to August's eight-and-a-half-year high, and demand was stronger across a broad range of Asian economies as well as the United States.Factories kept adding to staffing levels to expand capacity, and the rate of job creation was close to August's multi-year record. An S&P Global economist described employment as a particular bright spot, rising at the second-fastest rate since April 2018. Backlogs of work rose at the softest pace in six months.Supply conditions remained strained. Purchasing activity increased again, but delivery times for inputs lengthened, with the deterioration in supplier performance among the steepest in four years. Panellists widely cited product shortages, particularly of electronic components and AI-related technology. Stocks of finished goods rose for the first time in more than two years and at the quickest pace since June 2023, reflecting delayed shipments to clients, higher production and efforts to build stocks amid strong demand.Cost pressures stayed sharp. Input costs rose rapidly again, although the rate of inflation edged down to a six-month low. Panellists cited higher prices for staff, raw materials, energy and transport, which some firms linked to the war in the Middle East and a weak yen. Manufacturers raised their own selling prices again, at a rate among the quickest since late 2022. The economist said companies suggest the worst of the recent price rises may have passed, but expenses still rose sharply at the end of the third quarter.Manufacturers were generally confident that output would rise over the coming year, often citing expected demand from overseas clients and robust demand for semiconductors and AI-related technology. Positive sentiment was little changed from August and comfortably above the series' long-run average. The economist noted that the survey rounded off the best quarterly performance since the first quarter of 2014, but said headwinds including further supply chain disruption, component shortages and sharply rising costs could temper growth. The survey data were collected between 8 and 24 September. This article was written by Eamonn Sheridan at investinglive.com.