TOKYO (Reuters) – Japan’s factory activity shrank for a fifth straight month in October while the service sector saw its weakest growth this year, a survey showed on Tuesday, amid growing uncertainty over the outlook for the world’s third-largest economy.
The au Jibun Bank flash Japan manufacturing purchasing managers’ index (PMI) remained flat at 48.5 in October. The index has remained below the 50.0 threshold that separates contraction from expansion since June.
Output slipped at the fastest rate in eight months due to a decline in new orders, the survey showed. Pressured by lower capacity, employment levels slipped into contraction for the first time since February 2021.
Cost pressures eased slightly as input price inflation hit a three-month low. The government said on Friday Japan’s core inflation last month slowed below the 3% threshold for the first time in over a year.
However, the October PMI data indicated further softening in the service sector, which anchored Japanese economy over recent quarters.
The au Jibun Bank flash services PMI fell further to 51.1 in October from 53.8 in September last month, marking the slowest rate of growth since the beginning of this year.
New businesses expanded but at a slower pace and foreign demand for services slid for the first time in 14 months, according to the survey.
“Firms were also the least upbeat since January, reflecting reduced optimism with regards to future output,” said Jingyi Pan, economics associate director at S&P Global Market Intelligence, which compiled the survey.
The au Jibun Bank Flash Japan composite PMI, which combines both manufacturing and service sector activity, fell to 49.9 in October from 52.1 in September, dropping below into contractionary territory for the first time since December.
(Reporting by Satoshi Sugiyama. Editing by Sam Holmes)