May 23, 2017 / 11:02 PM / 2 months ago

Japan manufacturers' mood slips despite econ recovery - Reuters Tankan

3 Min Read

* April manufacturers' sentiment index +24 vs +26 in April Service-sector index +30 in May vs 28 in April

* Manufacturers' mood seen steady ahead, service-sector down

* Reuters Tankan strongly correlates with BOJ tankan

By Tetsushi Kajimoto and Izumi Nakagawa

TOKYO, May 24 (Reuters) - Confidence among Japanese manufacturers worsened in May for the first time in nine months after hitting a decade-high level April, a Reuters survey found, showing the guarded nature of business optimism in a nascent export-led economic recovery.

The Reuters' monthly poll - which tracks the Bank of Japan's key quarterly tankan - showed confidence at service-sector firms hit a four-month high, a tentative sign of a pickup in domestic demand.

The Reuters Tankan follows data last week that showed the economy expanded for a fifth straight quarter at the start of this year led by exports and private consumption, although sluggish wage growth weighed on households.

In the poll of 527 large- and mid-sized firms, conducted between May 9-19 in which 243 responded, the sentiment index for manufacturers fell two points to 24 in May, dragged down by the food processing, precision machinery and chemicals industries.

It followed a score of 26 in April, which was the highest reading since August 2007, a year before the collapse of a U.S. investment bank Lehman Brothers triggered the global financial crisis.

The service-sector mood was up two points to 30 in May, the best reading since the beginning of this year, led by retailers.

The sentiment index was seen unchanged at 24 for manufacturers in August, but the index was expected to fall to 22 for non-manufacturers.

"We feel the economy is picking up as suggested by recovery in resources prices, but capital spending at our clients is lagging behind," a manager at a machinery manufacturer wrote in the survey.

Import-dependent industries such as food processors complained about rising commodity prices and a weak yen that drive up import costs. Some exporters expressed concerns over uncertainty in the global economic outlook.

While manufacturers saw business conditions holding steady in the coming three months, non-manufacturers expected them to worsen in August, a sign of uneven economic recovery.

"Local areas in Japan show no sign of economic uptrend. Movement of freight is slow at local ports due to sluggish consumption," a manager of a transport firm wrote in the survey.

The Bank of Japan's last tankan out on April 3 showed big manufacturers' business confidence improved for a second straight quarter to hit a one-and-a-half year high, and service-sector sentiment improved for the first time in six quarters.

The Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic respondents from optimistic ones. A negative figure means pessimists outnumber optimists.

Reporting by Tetsushi Kajimoto; Editing by Eric Meijer

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