The decline in Japan's factory activity accelerated in May as output and orders slumped, highlighting increasing stress in the manufacturing sector from the coronavirus pandemic.
The au Jibun Bank Flash Japan Manufacturing Purchasing Managers' Index (PMI) slipped to a seasonally adjusted 38.4 from a final 41.9 in April, its lowest since March 2009. The headline figure was pulled down by sharp declines in output, new orders and the backlog of work, which all contracted at the fastest pace in more than a decade.
"While the rate of decline in services activity has eased very slightly, plummeting demand for goods is finally catching up with the manufacturing sector," said Joe Hayes, economist at IHS Markit, which compiled the survey. A bright spot in the gloomy data were employment conditions, which were flat. The index stayed below the 50.0 threshold that separates contraction from expansion for a 13th month.
The pandemic has been particularly disruptive for global supply chains, causing trouble for trade-reliant nations such as Japan. The world's third-largest economy fell into recession for the first time in 4-1/2 years in the first quarter, data showed this week. Analysts polled by Reuters foresee a record decline for the economy in the current quarter.
Japan's services sector also remained deep in contraction, although the pace of decline moderated slightly. The au Jibun Bank Flash Services PMI index edged up to 25.3 on a seasonally adjusted basis from a record low of 21.5 in the previous month. The au Jibun Bank Flash Japan Composite PMI, which includes both manufacturing and services, stood at 27.4 in May, slightly above the previous month's final of 25.8.