JAPAN’S factory activity contracted but approached the break-even point in April, a business survey showed on Tuesday, suggesting the key sector is finally picking up after months of sluggishness.

The au Jibun Bank flash Japan manufacturing purchasing managers’ index (PMI) rose to 49.9 in April from 48.2 in March, remaining below the 50.0 threshold separating growth from contraction for 11 straight months.

Still, the index was closest to the break-even level since slipping into contraction in June, the data showed.

“While the service sector remained the primary driver of growth, it was encouraging to see the deterioration in manufacturing output further ease in April,” said Jingyi Pan, economics associate director at S&P Global Market Intelligence, which compiled the survey.

The output and new orders, the two key subindexes contributing to the headline figure, contracted at the slowest pace in six and 10 months, respectively.

Both manufacturers’ confidence and employment growth improved, the survey showed. Input cost inflation went up, which translated into average output prices rising at the fastest pace in nine months.

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The data also showed the service sector’s expansion accelerated in April, highlighting its robustness anchoring growth for the world’s fourth-largest economy.

The au Jibun Bank flash services PMI edged up to 54.6 in April, the highest since May last year, from 54.1 in March. The subindex of new business reported, the fastest expansion in 10 months, propelled the headline growth.

More service providers also passed on additional costs to customers, the research showed, leading to the selling prices rising at the highest level in a decade.

The au Jibun Bank flash Japan composite PMI, which combines both manufacturing and service sector activity, climbed to 52.6 in April, matching the highest level seen in August. REUTERS