Japan’s industrial activity has undergone its strongest contraction in the last seven years in February. The deepening downturn due to the coronavirus epidemic increases the risk of recession in the third-largest economy in the world.

The downturn in the industry provides the clearest evidence of the severe impact of the epidemic on global growth and business and is likely to exacerbate pressure on Japanese authorities to increase incentives.

The PMI contracting index of the industry sector, calculated by Au Jibun Bank, fell on a seasonally adjusted basis to 47.6 points from the 48.8 points reported in January. Thus, the indicator reports its lowest level since the end of 2012.

The index remains below the 50.0 point value, which separates the contraction from the expansion for the 10th consecutive month. This is the longest economic contraction in the country since 2009.

The study further showed that new orders have been declining at the fastest pace in more than seven years.

“The latest PMI data significantly increases the prospect of a technical recession in the world’s third-largest economy”, said Joseph Hayes, an economist at IHS Markit. “Activity in the services sector has declined at its strongest rate since June 2016, with survey data showing that the coronavirus epidemic has hit Japan’s tourism industry particularly hard, a major source of demand for services”, added he.

PMI index for the services sector reported a level of 46.7 points, marking a significant drop from the registered 51 points in January.

Last week’s data showed that the country’s economy has shrunk at its fastest pace in nearly six years in the last quarter of last year.

Au Jibun Bank Flash’s PMI fell to 47 points in February, reaching its lowest level since April 2014. Last month the indicator registered a level of 50.1 points.

“February PMI data largely obliterates the chance of expansion in the first quarter, despite Prime Minister Shinzo Abe’s efforts to stimulate the economy after a tax hike”, said Joseph Hayes.