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Activity in Japan's service sector shrank at the fastest pace in 15 months as restrictions to combat the nation's worst wave of Covid-19 infections hit businesses.
The au Jibun Bank's purchasing managers index of activity in Japan's service sector fell 3.9 points to 43.5, the lowest since May 2020. The services PMI has run below 50, indicating contraction, every month since February 2020.
A separate measure of Japan's export-heavy manufacturing sector signaled a seventh month of growth, but slipped 0.6 point to 52.4.
Japan continues to ask restaurants and bars continue to close early, with a fourth state of emergency extended to mid-September to cope with the recent spread of the highly contagious delta variant. Manufacturers have been supported by solid overseas demand even as the trade recovery shows signs of peaking amid the virus's spread.
Japan's quickening vaccination drive is expected to help consumption pick up down the road. About 40% of Japan's population has been fully vaccinated, according to Johns Hopkins University. Prime Minister Yoshihide Suga expects 60% of the population to be fully vaccinated by the end of September and plans to distribute enough doses to inoculate 80% of eligible people by early October.
“Japanese private sector businesses noted that the recent surge in Covid-19 cases related to the Delta variant had dampened prospects,” said Usamah Bhatti, economist at IHS Markit, which compiles the PMI survey. “Firms indicated the softest degree of optimism regarding the year-ahead outlook for one year.”
The report said new orders for manufacturers continued to increase, although growth was the slowest since January and severe supply chain disruptions were squeezing inputs for production.
Toyota Cuts Shows Covid Ravaging Even Best Supply Planners
Toyota Motor Corp, Japan's biggest carmaker, last week said it will suspend output at 14 domestic plants for various lengths of time through next month due to parts shortages resulting from the spread of Covid in Southeast Asia.
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