Jibun Bank/Markit Services and Composite PMI

Key points made by MArkit in the report:

  • Output falls at near-record pace as COVID-19 pandemic hits demand
  • Employment declines as operating requirements slump
  • Business activity expected to fall sharply over the coming 12 months

Joe Hayes, Economist at IHS Markit:

  • "The global COVID-19 pandemic caused severe disruption to Japan's services economy in March. There had already been some knock back in February from reduced tourism, particularly from China, but latest data show that the economic impact has become widespread.
  • "The headline index for the service sector sank by 13 points to reach a low not seen since the global financial crisis. This signals how aggressive and sudden the drop in activity has been as people stop partaking in non-essential activities.
  • "During the March survey period (12-26 March), the outbreak in Japan was not even close to the scale seen in Europe and the latest combined manufacturing and services PMI data already point to GDP contracting at an annual rate of around 8%. If the outbreak were to escalate in Japan such that widespread lockdowns are imposed, GDP in the second quarter could be poised for an annual decline in excess of 10%."

The comment about "aggressive and sudden drop in activity" is right. Some have argued that the sudden drop will quickly be unwonound. Not just Japan but other economies also.

I doubt that. Protracted lower levels of activity are ahead for many months to come. Yes, once folks are released from lock down there will be a desire to head out, have a good time, buy some stuff. But I think caution over employment and household finances will constrain any boom.