In a reflection of its ongoing sluggish economy, Japan's tertiary industry activity index experienced a slight decrease of 0.1% in June compared to the previous year, and a seasonally adjusted drop of 1.3% from May, as reported by the Ministry of Economy, Trade and Industry (METI) on Friday. This index is critical as it measures the fluctuation in the value of services procured by businesses in Japan, making it a key leading indicator of the country's overall economic performance. While the tertiary industry index paints a somewhat pessimistic picture, it is important to delve deeper into specific segments.
The index that tracks a wide range of personal services increased by 0.2% year on year in June, although there was a decline of 0.5% from May figures. On the other hand, the broad category of business services saw a 0.3% year-on-year decrease, falling by 1.3% from May, highlighting a troubling trend in this vital sector, as confirmed by METI's report. The sharpest declines were observed in the transportation and postal segment, which encompasses road freight services.
This subset recorded a year-on-year downturn of 0.2% in June and a significant decline of 4.8% from the preceding month, a clear indicator of the challenges facing the logistics sector as captured by METI. Moreover, wholesale trade also took a hit, showing a notable drop of 4.4% year-on-year in June, with a 4.1% decline from May.
These figures illustrate the difficulty faced by these sectors amidst a broader economic context. Contrasting these declines, the living and amusement-related services subcategory reported a robust year-on-year growth of 5.4% in June, and a promising rise of 3.4% from May, signaling a potential area of resilience within the otherwise struggling tertiary sector, as noted in the METI report. Notably, this somewhat gloomy report on the tertiary index is juxtaposed with more optimistic findings from a Thursday report by the Cabinet Office, which indicated that Japan's gross domestic product (GDP) expanded at an annual rate of 3.1% in the second quarter, a notable recovery from a contraction of 2.3% in the first quarter. Adding to the positive signs, Japan's composite purchasing managers index (PMI) improved to 52.5 in July, up from 49.7 in June, indicating a resurgence in private sector activity, as per the early August report by S&P Global.
This renewed expansion fosters hope for a turnaround despite the mixed indicators from the tertiary industry sector. The interplay between these economic indicators will surely continue to offer insights into the direction of Japan's economy as both analysts and investors navigate these complexities..