Japan Oct manufacturing PMI hits near 7-year low

TOKYO, Oct 31 (Reuters) - The Japan Purchasing Managers Index showed manufacturing activity fell to a seven-year low in October, suggesting conditions in the sector may be worsening as a global slowdown and credit crisis push Japan further towards recession.

The Nomura/JMMA Japan Purchasing Managers Index, which gives an early snapshot of the health of manufacturing, sank to a seasonally adjusted 42.2 in October, below the 50 mark dividing growth from contraction for the eighth straight months.

It was the lowest reading since December 2001 when Japan was in recession in the wake of the collapse of a bubble in technology stocks.

The monthly poll of over 400 industrial firms fuelled fears of a deep recession in the world's second-largest economy, as crumbling U.S. and European markets hit its export-led growth.

"Disarray in financial markets and the ensuing global chaos appears to be leading the manufacturing industry down the road to protracted recession," said Alex Hamilton, an economist at research firm Markit, which compiled the survey.

Exporters registered the lowest volumes of demand for Japanese goods from abroad in October due to the fallout from the 15-month old financial crisis, survey showed.

New export orders fell to 37.5 from 45.4 in September, the lowest on record and below the 50 mark for the ninth straight month.

Government data on Wednesday showed Japan's industrial output fell 1.2 percent in July-September, with bleak forecasts by manufacturers prompting a view that output may fall for four quarters in a row, which would match a four-quarter run in 2001.

The PMI's output index, which approximates industrial production, reinforced such outlook.

The index fell to 39.7 in October, marking the lowest reading since December 2001.

The new orders index, a barometer of future demand that combines goods orders from both home and abroad, hit a sever-year low of 34.5 from 39.6 in September. (Reporting by Tetsushi Kajimoto)