TOKYO (Reuters) – Japan’s factory activity contracted for the fourth straight month and the service sector growth slipped to an eight-month low, a survey showed on Friday, highlighting the challenges facing the economy as it struggles to mount a strong recovery.
The au Jibun Bank flash Japan manufacturing purchasing managers’ index (PMI) declined to a seasonally adjusted 48.6 in September from 49.6 in August.
The index has remained below the 50.0 point threshold that separates contraction from expansion for four months after briefly popping above that level in May. Activity was in contractionary territory before that for six straight months.
Output fell to the lowest level since June while new orders dropped at the steepest pace in seven months, the survey showed. Manufacturers also faced elevated price pressures with the rate of input price inflation reaching four-month high.
“The Japanese private sector economy signalled a further loss of growth momentum at the end of the third quarter of 2023,” said Usamah Bhatti, economist at S&P Global Market Intelligence, which compiled the survey. “Forward-looking indicators from the survey suggest the potential for softening demand and activity over the coming months.”
That gloomy prospect was not helped by some softening in the services sector, which has underpinned the world’s third-biggest economy over recent quarters.
China’s economic woes and elevated global interest rates have clouded Japan’s growth outlook amid an uneven post-COVID bounce.
The au Jibun Bank flash services PMI dropped to a seasonally adjusted 53.3 in September from 54.3 last month, marking the lowest level since January.
Employment levels declined at the fastest pace since January last year and foreign demand for services swung back to contraction territory for the first time since August 2022.
The au Jibun Bank Flash Japan composite PMI, which combines both manufacturing and service sector activity, sank to 51.8 in September from 52.6 in August, dented by slowdown in new order growth.
(Reporting by Satoshi Sugiyama; Editing by Shri Navaratnam)