Japan Private Sector Slips Into Contraction In October

Japan’s private sector contracted in October as typhoon disrupted service sector activity, survey results from IHS Markit showed Thursday.

The Jibun Bank flash composite output index fell to 49.8 from 51.5 in September. A score below 50 indicates contraction in the sector.

The manufacturing Purchasing Managers’ Index came in at 48.5 versus 48.9 in September. The index remained at sub-50 level for the sixth consecutive month.

Manufacturing activity logged its biggest fall since mid 2016 amid the sharpest decrease in new orders since December 2012 as firms reported that weak global trade conditions and softer growth at key export markets restricted demand.

The services PMI dropped to 50.3 from 52.8 a month ago. The marginal expansion in output was the softest in just over a year.

“Overall, it seems that temporary domestic factors have been the primary cause of reduced output at the start of the fourth quarter, suggesting there is potential for some pay-back in November, but it is the gulf in demand conditions between the two sectors which will play the pivotal role in determining how Japan’s economy fares towards the year-end,” Joe Hayes, an economist at IHS Markit said.

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