Investing.com-- Japanese manufacturing activity shrank in early August as the country’s biggest automakers struggled with disruptions in output, while services activity grew further on improving local demand.
The flash au Jibun Bank Japan Manufacturing purchasing managers index read 49.5 for August, missing expectations of 49.8 but improving slightly from the 49.1 seen in July. A reading below 50 indicates contraction, with Thursday’s reading showing a second straight month of declines.
Weakness in manufacturing was spurred chiefly by sustained production disruptions in Japan’s biggest automakers, as a scandal involving falsified safety checks worsened. Majors such as Toyota (NYSE:TM), the country’s biggest automaker, had issued recalls and halted shipments over a government probe into the industry.
But Japan’s services sector fared much better, benefiting from improving domestic demand as the effects of bumper wage hikes from earlier this year began to be felt around the country.
The au Jibun Bank Japan Services PMI read 54, reflecting improved growth after a 53.7 reading in July.
Demand for services kept overall Japanese business activity in expansion territory, and was also aided improving export demand.