Investing.com-- Japanese manufacturing activity shrank way more than expected in January, marking a seventh consecutive month of contraction, preliminary purchasing managers index data showed on Friday, while services sector activity picked up.
The au Jibun Bank manufacturing purchasing managers' index (PMI) declined to 48.8 in January from 49.6 in December, below the forecast of 49.7.
A reading below 50 indicates contraction, with the manufacturing PMI now shrinking for a seventh straight month.
The decline showed that Japanese manufacturing business conditions worsened to the largest extent in ten months.
Production levels fell modestly, and at the strongest rate since last April, while new order inflows fell at the quickest pace in six months, data showed.
"Manufacturing new orders fell at the most marked rate since last July. Concurrently, the level of outstanding business reduced for the second successive month as both the manufacturing and services sectors saw falling backlogs, suggesting that the current uplift in activity is at least in part being driven by the completion of existing orders," said Usamah Bhatti, economist at S&P Global (NYSE:SPGI) Market Intelligence, which compiled the survey.
Meanwhile, the au Jibun Bank services PMI rose sharply to 52.7 in January from 50.9 in the previous month.
"Supporting the growth of (services) activity was a steeper rise in new business," the survey stated.
As a result, Japanese service providers raised employment levels, despite confidence levels remaining broadly similar to that seen at the end of last year, according to the survey.
The au Jibun Bank flash Japan composite PMI, which weighs both manufacturing and services PMI increased to 51.1 in January from 50.5 in the prior month.