Japan’s coronavirus shutdowns pummel service, factory sectors: PMIs

TOKYO (Reuters) – Japan’s services sector shrank at a record pace in April, while factories also fell quiet across the country due to the widening fallout from the coronavirus pandemic as an economic contraction deepens.

FILE PHOTO: Chimneys are seen at an industrial area in Yokohama, Japan, January 16, 2017. Picture taken January 16, 2017. REUTERS/Kim Kyung-Hoon

The au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI), released on Thursday, slumped to a seasonally adjusted 43.7 from a final 44.8 in March, its lowest since April 2009.

The au Jibun Bank Flash Japan Services PMI index plunged to 22.8 on a seasonally adjusted basis, marking the lowest since the start of the services sector survey in September 2007.

Services sector activity compared with a final reading of 33.8 in the previous month.

Large parts of the world’s third-largest economy have come to a standstill after the government announced a month-long state of emergency to fight the widening virus pandemic.

“The current state of emergency will stay in place until 6 May,” said Joe Hayes, economist at IHS Markit, which compiles the survey.

“Given Japan’s lagged response relative to other parts of the world, one would expect this to be extended, meaning the harsh economic effects are likely to drag out further.”

The economy looks set to contract at an annual rate of more than 10% in the second quarter, Hayes added, likely marking the third straight quarter of contraction.

The PMI manufacturing survey showed the downturn in factory output gained speed from the previous month, with the sub-index hitting its lowest in nine years.

Companies overwhelmingly said that was due to the coronavirus pandemic, IHS Markit said, which triggered factory shutdowns, delayed deliveries and led to a plunge in sales.

Other indicators in the manufacturing survey such as employment and intakes of new work also dropped.

Japan’s government raised the size of its new economic stimulus package this week to a record $1.1 trillion as a demand shock from the virus threatens to push the economy into the deepest recession in at least a decade.

The au Jibun Bank Flash Japan Composite PMI, which includes both manufacturing and services, fell to 27.8 in April, also the lowest on record and down from the previous month’s final of 36.2.

Reporting by Daniel Leussink; Editing by Sam Holmes

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