Japanese manufacturing activity contracted at a slower pace in March than the previous month, but output fell at the sharpest rate in nearly three years, a private business survey showed on Monday, reflecting weak demand at home and abroad.

The latest survey bolstered the view the Japanese economy, the world’s third largest, is hitting a soft patch as the Sino-U.S. trade war dents global demand, dealing a blow to export-reliant Japan and its business and consumer confidence.

The final Markit/Nikkei Japan Manufacturing Purchasing Managers’ Index (PMI) was a seasonally adjusted 49.2, up a tad from February’s final 48.9, which was also the flash reading for March.

The index was below the 50 threshold that separates contraction from expansion for the second consecutive month.