In April, Japan's manufacturing sector experienced a milder contraction, marking its slowest decline in six months, while the service sector maintained steady growth. The softening decline in sales contributed to the somewhat improved manufacturing activity, highlighting the uneven nature of Japan's post-COVID economic recovery.
The preliminary survey revealed that the au Jibun Bank flash Japan manufacturing purchasing managers' index (PMI) increased to a seasonally adjusted 49.5 in April, up from 49.2 in March. Despite the increase, the index remained below the 50-point threshold separating contraction and expansion for six consecutive months, indicating the ongoing challenges faced by the manufacturing industry.
In contrast, the service sector's activity expanded for the eighth month in a row, supported by increases in new orders and new export businesses. Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, which compiles the survey, noted that Japan's private sector continued to grow at a healthy pace in Q2, with the service economy compensating for the weaker manufacturing performance.
Although service providers expect further improvements in demand and operating conditions as COVID-19's impact diminishes, some manufacturers expressed concerns about the economic outlook, rising costs, and component shortages.
On Wednesday, the Reuters Tankan survey reported that large Japanese manufacturers remained pessimistic in April for the fourth consecutive month due to concerns about Western banks and a decelerating global economy. However, the service sector's mood improved for the second month in a row, reaching a four-month high.
The au Jibun Bank flash services PMI experienced minimal change, with a seasonally adjusted 54.9 this month compared to 55.0 in March, marking the second-highest reading since October 2013. The au Jibun Bank Flash Japan composite PMI, which encompasses both manufacturing and service sector activities, stood at 52.5 in April, surpassing the 50-point mark for the fourth consecutive month.
