Japan’s Feb factory activity extends decline as conditions worsen

A worker walks at a factory in Tokyo March 29, 2013. REUTERS/Toru Hanai/File photo

TOKYO  —Japan’s factory activity extended declines and service sector growth eased in February, surveys showed on Thursday, suggesting business conditions were worsening as the economy struggles to emerge from recession.

The flash au Jibun Bank Japan manufacturing purchasing managers’ index (PMI) fell to 47.2 in February from 48.0 in January.

The headline index has remained below the 50.0 threshold that demarcates growth from contraction for nine straight months.

“The Japanese private sector economy saw the slight improvement at the start of the year all but evaporate during February, as business activity broadly stagnated,” said Usamah Bhatti at S&P Global Market Intelligence.

READ: Japan Jan factory activity shrinks, but service sector picks up

“Firms were also the least upbeat since January 2023, reflecting reduced optimism with regards to future output,” he said.

Among the subindexes, production in the manufacturing sector shrank at the fastest pace in a year due to a sharp reduction in new orders, the survey showed. Also employment slumped at the quickest pace since January 2021 on declines in purchasing activity and easing capacity constraints.

Manufacturers’ morale down

The au Jibun Bank flash services PMI eased to 52.5 in February from 53.1 in January, although it has remained in expansionary territory above the 50 threshold since September 2022. The subindex of new business showed the pace of growth in new business at its highest since August last year.

READ: Japan manufacturers’ gloom rises, adds to growth pains

The au Jibun Bank flash Japan composite PMI, which combines both manufacturing and service sector activity, eased to 50.3 in February from 51.5 in January.

The Reuters Tankan survey published on Wednesday found Japanese manufacturers’ business morale soured sharply in February with pessimists outnumbering optimists for the first time in 10 months, adding to concerns about further economic declines.

Japan’s economy unexpectedly slipped into recession in the fourth quarter of last year, losing its title as the world’s third-biggest economy to Germany.