Japan’s private sector activity registered a steady growth in February as the sharp deterioration in manufacturing activity was offset by the robust improvement in the service sector, a closely watched survey showed on Tuesday.
The flash au Jibun Bank composite output index remained unchanged at 50.7 in February, data published by S&P Global revealed. A score above 50.0 indicates expansion in the sector.
The flash manufacturing Purchasing Managers’ Index declined to 47.4 from 48.9 in the previous month. The sector posted one of the sharpest falls in two-and-a-half years.
There were steeper reductions in output and new orders, with both falling the most since July 2020. Nonetheless, cost and supply pressures showed signs of easing and manufacturers raised their staffing levels.
The Ministry of Economy, Trade and Industry is slated to issue preliminary industrial output data on February 28.
“We won’t be surprised if firms were to revise down their forecast for a 4.1% m/m rise in output for February when the data are released next week,” Capital Economics’ economist Darren Tay said. “The chief culprit appears to be external demand.”
Meanwhile, the flash au Jibun Bank services PMI advanced to 53.6 in February from 52.3 in the prior month.
The service sector has expanded over the past six months as the most recent wave of the Covid-19 pandemic subsided, S&P said based the survey responses from a panel of around 400 service sector companies.
New order growth improved in February, while employment ticked down, suggesting that outstanding business accumulated to the greatest degree since the survey started in September 2007.
At the same time, rates of both input cost and output price inflation quickened from the start of the year.
Official data released earlier this month showed that the economy had expanded 0.2 percent in the fourth quarter, reversing 0.3 percent contraction a quarter ago.
The International Monetary Fund forecast Japan’s economic growth to improve to 1.8 percent in 2023, underpinned by continued monetary and fiscal policy support. However, growth is expected to decline to 0.9 percent next year as the effects of past stimulus dissipate.
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