Japan's Oct manufacturing activity falls amid global COVID-19 resurgence

BY Reuters | ECONOMIC | 10/22/20 08:30 PM EDT

TOKYO, Oct 23 (Reuters) - Japan's factory activity extended declines in October, a private sector survey showed on Friday, highlighting the impact a resurgence in global coronavirus infections has had on the world's third-largest economy.

The contraction in manufacturing is at risk of extending further as new infections throw cold water on hopes of an export-led recovery for the trade-reliant economy.

The au Jibun Bank Flash Japan Manufacturing Purchasing Managers' Index (PMI) edged up to 48.0 in October from a final 47.7 in the previous month, staying below the 50.0 threshold that separates contraction from expansion for an 18th month.

The PMI survey pointed to some bright spots, with the headline pace of decline coming in at its slowest since January as overall output and new orders moved closer to stabilisation.

But the data also showed service sector activity in October contracted at a faster pace than in the previous month, casting a shadow over private sector conditions as a whole.

"The Japanese private sector started the fourth quarter on a weak footing," said Bernard Aw, principal economist at IHS Markit, which compiles the survey.

"The recovery is slow-going and could remain so in the coming months as a global resurgence of COVID-19 cases could weigh on Japanese economic activity, particularly in the external-facing sectors," he said.

Japanese media have reported Prime Minister Yoshihide Suga plans to order his government to compile a stimulus plan as early as next month to bolster fragile consumer sentiment that faces risks from a new wave of infections.

The PMI survey showed the au Jibun Bank Flash Services PMI index slipped to a seasonally adjusted 46.6 from the previous month's final 46.9.

The au Jibun Bank Flash Japan Composite PMI, which includes both manufacturing and services, was in line with the previous month, edging up to 46.7 from a final 46.6 in September.

(Reporting by Daniel Leussink; Editing by Sam Holmes)

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