The services sector in Japan continued to contract for the sixth straight month during July, even as the coronavirus pandemic rages on across the country and most parts of the world. The final Jibun Bank Japan Services PMI touched a seasonally adjusted 45.4 in July, slightly higher than the reading of 45 in the previous month.

According to Tim Moore, director at IHS Markit, “While there were some positive signs in terms of domestic sales, large parts of the service sector remained impacted by fragile customer demand and the cancellation of projects due to the pandemic. As a result, service providers commented on the need to reduce fixed overheads and an aversion to replacing departing staff.”

The pandemic-driven lockdowns have had a severe impact on consumer demand, keeping the services sector under pressure in Japan. The contraction was driven by a reduction in be export orders as well as employment in the sector.

On a positive note, however, business outlook among services firms for the next year turned optimistic after five months, indicating hopes of recovery in the near future. Japan’s economy has already fallen into recession during Q1 2020 and is expected to experience the worst downturn since WW2.