Japan emergency curbs push private-sector activity into contraction

[TOKYO] Japan's factory activity expanded at a slower pace in May as growth in output and new orders eased, in a sign emergency curbs to stem a rise in coronavirus infections were hampering the country's economic recovery.

Activity in the service sector contracted at the fastest pace in nine months, pulling the private sector as a whole into contraction after the previous month's expansion.

The au Jibun Bank Flash Japan Manufacturing Purchasing Managers' Index (PMI) weakened to a seasonally adjusted 52.5 in May from a final 53.6 in April.

The PMI survey showed overall output posted the weakest monthly expansion since February, in a sign a state of emergency curbs in Tokyo and other major areas were taking a toll on manufacturers.

"Disruption to short-term activity is likely to remain until the latest wave of Covid-19 infections passes and restrictions enacted under state of emergency laws are lifted," said Usamah Bhatti, economist at IHS Markit, which compiles the survey.

Manufacturers saw input prices rising for a 12th month, while output prices were largely unchanged, causing the widest gap between the two in nearly a decade.

Manufacturers' expectations for the year ahead remained elevated on hopes of a pickup in economic activity following a wider vaccine rollout, coming in at their highest since July 2017.

But the PMI survey also pointed to a marked decrease in services-sector activity, which contracted at the fastest pace since August last year.

The au Jibun Bank Flash Services PMI index slumped to 45.7 on a seasonally adjusted basis from April's final of 49.5.

The au Jibun Bank Flash Japan Composite PMI, which is calculated using both manufacturing and services, fell to a four month low of 48.1 in May, down from the previous month's final of 51.0.

REUTERS