Service sector

Japan’s services sector activity in August contracts at fastest pace since May 2020 – PMI

Pedestrians wearing protective masks amid the coronavirus disease (COVID-19) outbreak walk on a street in Tokyo, Japan, February 2, 2021. REUTERS/Kim Kyung-Hoon/File Photo

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TOKYO, Sept 3 (Reuters) – Japan’s service sector activity contracted at the fastest pace in more than a year in August as a resurgence in COVID-19 cases dealt a blow to the recovery of the world’s third largest economy.

Activity and new business entries have shrunk at the fastest pace since May last year as businesses were hit by a resurgence in COVID-19 infections and expanded emergency measures.

Jibun Bank Japan’s final Services Purchasing Managers’ Index (PMI) fell to 42.9 seasonally adjusted from 47.4 in July, worse than a flash reading of 43.5.

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“Japanese service-sector companies reported an accelerated deterioration in business conditions in August,” said Usamah Bhatti, an economist at IHS Markit, which compiles the survey.

“The resurgence of COVID-19 infections due to the Delta variant has also resulted in a more marked reduction in incoming cases.”

A surge in infections in the Delta forced the Japanese government to expand state of emergency restrictions to more prefectures in August, hurting activity even as many people defied orders not to go out and avoid crowded places.

The reading marked the 19th month that services activity fell below the 50.0 threshold that separates contraction from expansion, the longest such streak since a 27-month run to March 2010.

The Jibun Bank Flash Japan Composite PMI Index, which is calculated using both manufacturing and services, fell to a one-year low of 45.5 from July’s final of 48.8 .

“Confidence in the outlook for private sector activity remained strong in August, although risks are on the downside,” Bhatti said.

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Reporting by Daniel Leussink; Editing by Sam Holmes

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