Pandemic keeps Japan's June manufacturing activity pinned at 11-year low: PMI

TOKYO (Reuters) - Japan’s factory activity remained stuck at an 11-year low in June, in a sign the coronavirus pandemic is taking a toll on manufacturers even as services-sector sentiment picks up.

FILE PHOTO: Chimneys of an industrial complex and Tokyo's skyline are seen from an observatory deck at an industrial port in Kawasaki, Japan, October 24, 2016. REUTERS/Kim Kyung-Hoon

The decline in manufacturing activity offers evidence of the prolonged impact the coronavirus crisis is having on export-reliant economies such as Japan’s.

The au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) edged down to a seasonally adjusted 37.8 from a final 38.4 in May.

The index recorded its lowest since March 2009 for a second straight month, staying below the 50.0 threshold that separates contraction from expansion for a 14th month.

The PMI survey showed that overall output and new orders declined for the 18th straight month, while stocks of purchases and backlogs of work were at more than decade lows.

The world’s third-largest economy is expected to suffer its worst postwar slump this quarter. However, the government last week upped its economic assessment for the first time since 2018 on signs of improving sentiment after a gradual lifting of a state of emergency in late May.

The PMI survey also pointed to a sharp increase in services-sector activity, which contracted at a much slower pace than in the previous month.

“Flash PMI data for June show us that economic activity in some parts of Japan has picked up at the back-end of the second quarter,” said Joe Hayes, economist at IHS Markit, which compiled the survey.

“However, a sub-50.0 reading in the composite output index indicates that the underlying picture remains bleak and many firms are yet to see a rise in output volumes.”

The au Jibun Bank Flash Services PMI index jumped to a four-month high of 42.3 on a seasonally adjusted basis from May’s final of 26.5.

The au Jibun Bank Flash Japan Composite PMI, which includes both manufacturing and services, stood at 37.9 in June, up from the previous month’s final of 27.8.

Reporting by Daniel Leussink; Editing by Sam Holmes