TOKYO, April 5 (Reuters) – Japan’s services sector activity contracted for the third consecutive month in March as the coronavirus pandemic weighed on demand, while the Russia-Ukraine war cast doubt on perspectives.
The pace of contraction slowed from the previous month, however, signaling that domestic demand was helped by the easing of pandemic curbs in parts of the country later in the month.
The Jibun Bank Japan Services Purchasing Managers’ Index (PMI) final rose to 49.4 seasonally adjusted from the previous month’s final of 44.2. It was also better than a flash reading of 48.7 for March.
“Panel members said the lifting of quasi-state of emergency measures boosted sales,” said Usamah Bhatti, economist at S&P Global, which compiles the survey.
“Despite growing demand, confidence in the outlook for the year ahead has weakened following the resurgence of the virus in China and the outbreak of war in Ukraine. As a result, businesses reported the smallest increase in positive feeling in seven months.”
Companies in the sector saw an overall rise in input prices for the 16th consecutive month, about the same pace as the previous month, largely due to rising raw material costs, particularly for fuel and energy.
The composite PMI, which is calculated using both manufacturing and services, slipped back into expansion territory for the first time in three months, rising to 50.3 from 45.8 in February.
Japan’s economy is expected to return to growth this quarter after an expected contraction in the first three months of the year, according to a Reuters poll, after the recent wave of Omicron infections eased, boosting business activity. consumers.
Bhatti said that overall, Japanese private sector companies saw a sharp increase in cost pressures in March as rising downside risks clouded the economic outlook for the 12 months ahead.
“The level of optimism hit a seven-month low amid concerns about a return to restrictions if cases increase and the Russian-Ukrainian war,” he added.
(Reporting by Daniel Leussink; Editing by Sam Holmes)