© Reuters. FILE PHOTO-A man handles a machine at lampshade manufacturer Seiko SCM in Higashiosaka, Japan June 24, 2022. REUTERS/Sakura Murakami

TOKYO – Japan’s manufacturing activity fell back into contraction in June and service sector growth slowed for the first time in seven months, surveys showed on Friday, as business confidence and demand weakened.

The au Jibun Bank flash Japan manufacturing purchasing managers’ index (PMI) dropped to a seasonally adjusted 49.8 in June from a final reading of 50.6 in May, back below the 50.0 threshold that separates contraction from expansion.

Both output and new orders swung into decline in June after growing in May, while new export orders dropped at the steepest pace since February.

“Some firms expressed more caution around the outlook due to strong cost pressures and lingering global economic uncertainties,” said Annabel Fiddes, economics associate director at S&P Global (NYSE:) Market Intelligence, which compiled the survey.

Cost pressures, however, continued to ease with input price inflation softening to a 22-month low.

The Reuters Tankan poll released on Wednesday found the mood among manufacturers was expected to rise over the coming three months, citing the post-COVID rebound in demand as a positive factor.

The au Jibun Bank flash services PMI dipped to a seasonally adjusted 54.2 in June from record-high 55.9 in the previous month. New business and new export orders slowed from May but it still showed robust growth, facilitated by an improvement in customer numbers and spending in post-COVID recovery.

The au Jibun Bank Flash Japan composite PMI, which covers both manufacturing and service sector activity, was 52.3 in June, down from a decade high of 54.3 in May.

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