Investing.com–Japanese manufacturing activity unexpectedly shrank in July, preliminary purchasing managers index data showed on Wednesday, while the services sector rebounded on robust demand.
The read 49.2 in the first three weeks of July, missing expectations of 50.5 and falling from the 50.0 seen in the prior month. A reading below 50 indicates contraction.
Weakness in manufacturing activity comes as weak offshore and onshore demand, coupled with lower production by major automakers weighed on the sector.
But this was largely offset by strength in the services sector. The surged to 53.9 in July from 49.4 in June.
The reading was the sector’s strongest expansion since April, and came amid improving consumer demand and confidence. Improving wage growth across the country factored into stronger demand, and also saw service providers pass on costs to their clients, heralding higher inflation.
Strength in the services sector helped overall business activity come back into expansion territory, with the flash composite output index rising to 52.6 in July from 49.7 in June.