TOKYO, Oct. 5 (Reuters) – Japan’s service sector activity contracted for a 20th consecutive month in September, as the coronavirus pandemic continued to weigh on sentiment, although the pace of the decline slowed compared to the strong contraction observed in August.
Last week, the government ended a state of emergency on restrictions it had imposed to bring the health crisis under control, as new cases and deaths rapidly declined last month and pressure on the system medical has abated.
The final purchasing managers index (PMI) at Jibun Bank Japan Services rose to seasonally adjusted 47.8 from 42.9 in the previous month, slightly better than an instantaneous figure of 47.4.
The reading marked the 20th month in which services activity remained below the 50.0 line between contraction and expansion.
“The Japanese service economy faced a sustained slowdown in demand conditions at the end of the third quarter,” said Usamah Bhatti, economist at IHS Markit, who compiles the survey.
“Panel members stressed that extending state of emergency restrictions amid the latest wave of COVID-19 infections continued to dampen production and demand. “
The PMI survey showed that the service sector turned more positive about activity over the coming year, with optimism reaching its highest since June in hopes that the impact of the pandemic on the world’s third-largest economy will weaken.
But it also showed that the private sector as a whole was facing the strongest headwind from rising costs in 13 years, as supply chain disruptions dampened national and global economic activity.
“The price increases have been particularly strong for raw materials, personnel and fuel,” Bhatti said.
The final PMI at Jibun Bank Flash Japan Composite, which is calculated using both manufacturing and services, remained in contraction, standing at 47.9, from 45.5 in August.
Reporting by Daniel Leussink; Editing by Sam Holmes