TOKYO (Reuters) – Activity in Japan’s services sector continued to falter in November, a private sector survey showed, as a resurgence in coronavirus infections weighed on new business and employment conditions.
The world’s third-largest economy has been gradually recovering from a virus-induced slump earlier this year, but it is expected to take years before it will return to pre-pandemic levels, especially within the service sector, which contributes nearly 70% of its gross domestic product.
The final Jibun Bank Japan Services Purchasing Managers’ Index (PMI) was little changed from October’s reading, edging up to a seasonally adjusted 47.8 from 47.7.
Though the final result was better than a preliminary 46.7 reading, the headline index remained firmly in contraction territory below the 50 neutral level.
Surveyed firms said a third wave of COVID-19 infections had depressed demand and led to more challenging business conditions.
“There were indications that the tentative recovery in the Japanese service sector lost momentum,” said Usamah Bhatti, economist at IHS Markit, which compiles the survey.
“A sharper fall in new business signified that demand remains fragile amid short-term uncertainty surrounding the length of the pandemic.”
The main reading was weighed by a faster contraction of new business, which fell at the quickest pace in three months.
Job market conditions also eased, slipping back into contraction, though the pace of job shedding remained minimal, the survey showed.
A draft of the government’s next stimulus package seen by Reuters showed authorities plan to keep setting aside money to promote domestic tourism and dining out, a move that will support an industry reeling under the fallout of the health crisis and the collapse of international tourism.
Still, the PMI survey showed firms remained optimistic about the outlook for the 12 months ahead, in part thanks to an anticipated boost from the delayed Tokyo Olympic Games next year.
The composite PMI including both manufacturing and services was also largely unchanged at 48.1 in November from the previous month’s final of 48.0.
(Editing by Sam Holmes)