Japan's recovery hopes hit by August factory activity contraction

Manufacturing PMI stays below 50 for 16th month as output, new orders continue to fall

Vehicles bound for shipment near Chiba Port in Japan last Saturday. Data on Monday showed Japan was hit by its biggest economic slump on record in the second quarter as the pandemic crushed demand for cars and other exports, knocking the size of real
Vehicles bound for shipment near Chiba Port in Japan last Saturday. Data on Monday showed Japan was hit by its biggest economic slump on record in the second quarter as the pandemic crushed demand for cars and other exports, knocking the size of real gross domestic product to decade-low levels.PHOTO: BLOOMBERG

TOKYO • Japan's factory activity extended its fall this month for a 16th month, casting doubt over manufacturers' hopes for a rapid recovery as they struggled with the coronavirus-induced global economic downturn.

The au Jibun Bank Flash Japan Manufacturing Purchasing Managers' Index (PMI) edged up to a seasonally adjusted 46.6 this month, from a final 45.2 in the previous month, recording its slowest pace of decline since February.

Still, the manufacturing index showed yesterday that it stayed below the threshold of 50 that separates contraction from expansion for a 16th month as output and new orders continued to contract.

If the final reading confirms the shrinking, it would mark the longest such stretch since a similar run to June 2009 following the 2008 global financial crisis.

"The prospect of a solid recovery remains highly uncertain as Japanese firms were pessimistic about the business outlook on balance in August," said Mr Bernard Aw, principal economist at IHS Markit, which compiles the PMI survey.

"Demand continued to be adversely affected by subdued trade flows and social distancing measures."

Data on Monday showed Japan was hit by its biggest economic slump on record in the second quarter as the health crisis crushed demand for cars and other exports, knocking the size of real gross domestic product to decade-low levels.

The PMI survey also pointed to further weakness in service-sector activity, which saw new and outstanding business and business expectations all fall to three-month lows.

The au Jibun Bank Flash Services PMI index dipped to a seasonally adjusted 45 from July's final of 45.4.

The au Jibun Bank Flash Japan Composite PMI, which includes both manufacturing and services, remained unchanged from the previous month at 44.9.

REUTERS

A version of this article appeared in the print edition of The Straits Times on August 22, 2020, with the headline 'Japan's recovery hopes hit by August factory activity contraction'. Print Edition | Subscribe