Service sector

Japan’s service sector activity contracts at fastest pace in 21 months – PMI

TOKYO, March 3 (Reuters) – Japan’s services sector activity shrank in February at the fastest pace in nearly two years, a survey showed on Thursday, as businesses were hit by consumer sentiment struggling after a record spike in infections with the Omicron variant of the coronavirus. .

The contraction in activity highlights the challenge Japanese policymakers face in boosting consumer spending to keep a fragile recovery on track as the Ukraine crisis and supply disruptions heighten market uncertainty. economic outlook.

The final Purchasing Managers’ Index (PMI) at Jibun Bank Japan Services fell to 44.2 seasonally adjusted from the previous month’s final of 47.6, marking the fastest rate of contraction since May. 2020.

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While activity remained well below the 50 mark that separates contraction from expansion on a monthly basis, that was better than a seasonally adjusted flash reading of 42.7.

“Activity and new business have declined at the fastest pace since last August,” said Usamah Bhatti, economist at IHS Markit, which compiles the survey.

Companies in the sector have seen prices for overall inputs rise for the 15th straight month, citing rising fuel and raw material costs, but that hasn’t led them to charge more for services as soaring cases coronavirus hit consumer demand.

“Companies tried to stimulate demand by embarking on price-cutting measures for the first time in six months, despite a further acceleration in average cost charges,” Bhatti said.

The composite PMI, which is calculated using both manufacturing and services, fell to 45.8 from January’s close of 49.9, contracting at the fastest speed in 18 months.

Separate government data showed Japan’s consumer confidence index fell for a third month in February, hitting a nine-month low.

“Higher COVID-19 infections … and a continued rise in prices for daily consumer goods have influenced consumer sentiment,” a government official said at a press briefing on Thursday, adding that 91.7% of consumers surveyed for the data said they expected prices to rise. increase in one year.

The world’s third-largest economy is set to see growth almost come to a halt this quarter, likely rising 0.4% annualized, as coronavirus curbs and supply bottlenecks weigh on overall activity, according to a Reuters poll this week. Read more

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Reporting by Daniel Leussink; Additional reporting by Kantaro Komiya; Editing by Sam Holmes and Lincoln Feast.

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