(Bloomberg) --
Japan’s factory activity fell to the lowest level in three years, adding to concerns over the impact of a delayed pickup in the global economy as the Bank of Japan concludes a review on the economy and inflation next week.
The Jibun Bank Manufacturing Purchasing Managers Index fell to 48.5 in October, the lowest level since June 2016, as new orders dropped at the fastest pace in nearly seven years. A number below 50 indicates a contraction.
A sharp fall in the service sector index to 50.3 is another cause concern. Recent growth in Japan’s economy has been heavily reliant on resilience outside Japan’s factory gates.
Joe Hayes, an economist at IHS Markit which compiles the survey, flagged a recent typhoon that disrupted supply chains and a sales tax that may have front-loaded activity as temporary factors that could be overstating the weakness seen in the survey.
“Japan’s economy hit a widely-expected bump in October following the consumption tax increase which took effect during the month,” Hayes said. “The latest data suggests the service sector is going to have a lot of slack to account for.”
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