TOKYO (Reuters) – Japan’s factory activity fell on the fastest pace in a 12 months in March, dragged by declines in production and recent orders in a worrying sign for the economy, a private-sector survey showed on Monday.
The service sector, which had been a vibrant spot in Japan’s economy, also lost momentum, with business activity contracting for the primary time in five months.
The au Jibun Bank Japan flash manufacturing purchasing managers’ index (PMI) fell to 48.3 in March, the bottom in a 12 months, from 49.0 in February.
The index stayed below the 50.0 threshold that separates growth from contraction for a ninth straight month.
The general business outlook slipped to the bottom since August 2020, with firms expressing worries about aspects reminiscent of rising costs, labour shortages and uncertainty over the worldwide trade environment.
“Strong inflation, coupled with concerns over labour shortages, an ageing population, subdued client spending and increased uncertainty over the international trade environment dampened optimism,” said Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence.
Amongst manufacturers, the subindex for production and recent orders contracted in March, which led firms to in the reduction of on purchasing activity and trim their inventories, the survey showed.
Firms increased employment for the fourth straight month amid a labour shortage.
Inflationary pressures stayed high and each input price and output charge indices maintained an expansionary trend.
“Cost pressures remained elevated in March, with overall input costs rising sharply across each monitored sectors, resulting in a solid rise in selling prices,” Fiddes said.
With lacklustre client spending, the au Jibun Bank flash services PMI shrank to 49.5 in March from 53.7 in February, the primary contractionary reading since last October.
The au Jibun Bank flash Japan composite PMI, which mixes each manufacturing and repair sector activity, slipped to 48.5 from 52.0 in February, also the primary contraction in five months.
(Reporting by Kaori Kaneko; Editing by Sam Holmes)