The Nikkei/Markit Manufacturing Purchasing Managers' Index, compiled by IHS Markit, showed improvement in manufacturing for the second consecutive month with the indicator standing steady at August levels of 51.2. The reading over 50 on the index is indicative of expansion. The analysts had forecast the index to be at 51.9.

The slight improvement is attributed to increase in both output as well as new orders. Survey shows pick up in certain goods categories including intermediate and consumer goods is compensating for any declines in investment goods.

Domestic demand which is indicated by the new orders sub-index also fell to three-month low level of 51 as against 51.5 reported for August 2017. At the same time, demand from international markets also saw a drop which is another factor preventing companies' from increasing their output level.

In the domestic markets, the demand has mainly seen a jolt due to demonetisation and the newly introduced indirect tax regime which has affected both the production as well as consumption simultaneously.

For the quarter ended June, GDP of the Asia's third-largest economy also declined to three-year levels of 5.7%.

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