TOKYO (Reuters) -Japan’s manufacturing activity slipped into contraction in July, weighed down by uncertainties over U.S. tariffs, a private-sector survey showed on Thursday.
At the same time, Japan’s service sector continued to outshine the struggling manufacturing industry, with activity growing at the fastest pace in five months, helped by robust demand.
“Business activity across Japan’s private sector continued to expand at the start of the third quarter, fuelled by stronger growth of the service sector,” said Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, which compiles the PMI.
The S&P Global Japan manufacturing purchasing managers’ index (PMI) dropped to 48.8 in July from June’s final reading of 50.1, which was the first time the index exceeded the 50.0 threshold separating expansion from contraction in 13 months.
The key sub-indexes of output and new orders dropped at the fastest pace in four and three months, respectively, as businesses assessed the impact from U.S. tariffs, the survey showed.
“Uncertainty over future trade policy weighed on expectations regarding the year-ahead,” Fiddes said.
U.S. President Donald Trump on Tuesday announced a trade deal with Tokyo that he said would result in Japan investing $550 billion into the U.S. and a 15% tariff on imports from the Asian country.
Meanwhile, the S&P Global Japan services PMI increased to 53.5 in July from 51.7 in June, thanks to new business growth.
However, new export business saw its first contraction in seven months and employment growth rose at the slowest rate in nearly two years.
Combining both manufacturing and service activity, the S&P Global Japan composite PMI in July remained unchanged from June’s 51.5, the data showed.
(Reporting by Satoshi Sugiyama; Editing by Sam Holmes)
