Japan's manufacturing activity continued to contract in July, with output falling for the seventh month in a row, survey data compiled by Jibun Bank Corp. and IHS Markit showed.

The headline Purchasing Managers' Index for manufacturing fell to 49.4 in July, above the downwardly revised reading of 49.3 in June, but representing the third consecutive month of deteriorating conditions in the sector amid weak new orders and output data. The PMI missed expectations of economists polled by Econoday that the figure would be confirmed at the flash reading of 49.6.

A reading below 50 reflects contraction, while a reading above indicates expansion.

Sales declined in July, continuing a downward trend since the start of 2019, as slower growth in both local and international markets affected demand, the survey said. Backlogs of work and post-production inventories fell, while the rate of job creation rose at the fastest in three months.

Business outlook for the next 12 months remained subdued amid trade tensions between the U.S. and China and potential escalations of Japan's own spat with South Korea, the survey added.