Japan's Services Sector Remains in Contraction Into August

Japan’s Services Sector Remains in Contraction Into August

Posted Thursday, September 3, 2020 by
Arslan Butt • 1 min read

The Japanese services sector contracted as a faster rate during August over continued uncertainty about the coronavirus pandemic and its economic fallout. The final Jibun Bank Japan Services PMI slipped to 45 in August from 45.4 in the previous month, staying below the 50-level indicating contraction.

Services sector firms reported that a lack of customers and lockdown restrictions were hampering their business activity levels even as employment continued to contract as a result of a decline in workloads. This sector has been hit harder than the manufacturing sector on account of the pandemic as consumers remain cautious about spending their money even as economic activity resumes across Japan.

New orders continued to decline for the seventh straight month during August, with the rate of decline speeding up since the previous month. Employment also continued to contract, with businesses laying off workers due to falling workloads.

Economics director at IHS Markit, Andrew Harker, notes, “The COVID-19 pandemic continued to hang over the Japanese service sector in August, halting previous momentum towards recovery amid fragile customer demand. Any return to growth will likely depend on confidence among companies and customers alike that the virus has been brought under control.”

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