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Survey raises Q4 contraction fears for Japan as manufacturing downturn continues

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Survey raises Q4 contraction fears for Japan as manufacturing downturn continues

Japan's economy faces the risk of slipping into contraction territory in the fourth quarter as economic growth stalled for the second straight month after a broad-based downturn in October, survey data compiled by Jibun Bank Corp. and IHS Markit showed.

The Flash Composite Purchasing Managers' Index, which includes manufacturing and services activities, came in at 49.8 in December, unchanged from the figure in November. A reading below 50 reflects contraction, while a figure above that indicates expansion.

Taking the fourth quarter as a whole, the poor performance in October, clubbed with stagnation in November and December, could drag the economy into contraction, Joe Hayes, economist at IHS Markit, said.

The flash manufacturing PMI was broadly unchanged at 48.8 in December, marking the eighth straight month of contraction, amid a decline in output and new orders.

The flash services business activity index, on the other hand, marginally improved to 50.6 in December from 50.3 in November, as new business and employment rose at the quickest pace in six months. Output in the services industry fell in October for the first time in over three years due to disruptions caused by Typhoon Hagibis and the nationwide sales tax hike.

Hayes said the services sector is unable to offset the industrial weakness, "which does not bode well for growth prospects in 2020," adding that Prime Minister Shinzo Abe's could help the economy.