Japanâ€™s services sector activity contracted at the fastest pace in over a year in August as a resurgence of COVID-19 cases dealt a blow to the worldâ€™s third-largest economyâ€™s recovery.
Activity and new business inflows shrank at the fastest pace since May last year, with businesses hit by a resurgence of COVID-19 infections and expanded emergency curbs.
The final au Jibun Bank Japan Services Purchasing managersâ€™ Index (PMI) plummeted to a seasonally adjusted 42.9 from Julyâ€™s 47.4, worse than a 43.5 flash figure.
â€œJapanese service sector businesses signalled an accelerated deterioration in business conditions in August,â€ said Usamah Bhatti, economist at IHS Markit, which compiles the survey.
â€œThe resurgence of COVID-19 infections due to the Delta variant also led to a steeper reduction in incoming business.â€
A surge in Delta infections forced Japanâ€™s government to expand state of emergency curbs to more prefectures in August, hurting activity even as many defied orders not to go out and to avoid crowded places.
The reading marked the 19th month that services activity came in below the 50.0 threshold that separates contraction from expansion, the longest such streak since a 27-month run through March 2010.
The final au Jibun Bank Flash Japan Composite PMI, which is calculated using both manufacturing and services, dropped to a one-year low of 45.5 from Julyâ€™s final of 48.8.
â€œConfidence about the outlook for private sector activity remained strong in August, although the risks are skewed to the downside,â€ Bhatti said.