TOKYO (Reuters) - Japanese manufacturing activity grew at a slightly faster pace in August as domestic demand jumped, a preliminary survey showed on Thursday, but export orders contracted, adding to worries about rising trade protectionism.
The flash Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) rose to 52.5 in August on a seasonally adjusted basis from a final 52.3 in July.
The index remained above the 50 threshold that separates expansion from contraction for the 24th consecutive month.
"August flash data extended the current growth cycle in Japan's manufacturing sector to two years, the longest uninterrupted stretch of expansion since the global financial crisis," said Joe Hayes, economist at IHS Markit, which compiles the survey.
"That said, with export orders declining, this signalled that the latest expansionary PMI reading was underpinned by strength in the domestic market."
The preliminary index for new orders rose to 52.6 from 50.9 in the previous month, highlighting the strength of domestic demand.
However, the flash index for new export orders fell to 49.3 from a final 50.0 in July to show the first contraction in two months.
Japan's economy grew more than expected in the second quarter, helped by strong household and business spending in a sign that domestic demand is gathering strength.
Real wages rose in June at the fastest pace in more than 21 years, which has also added to hopes that consumer spending will continue to rise.
There are still concerns that trade disputes with the United States will hurt demand for exports, which poses a serious risk to Japan's manufacturing sector, economists say.