Japan service sector growth slows in September
Japan's service sector saw a slower expansion in September, as business activity and new orders grew at a weaker pace compared to August. The S&P Global final Japan Services Purchasing Managers’ Index (PMI) dropped to 51.3 from a five-month high of 52.5 in August, missing the flash reading of 51.6. The 50-mark separates growth from contraction. Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, noted that the data indicated a softer expansion as the third quarter concluded.
New orders rose for the 27th consecutive month, but the pace slowed from August. Domestic demand continued to support sales, while new export business fell at the second-sharpest rate since January 2021. Employment increased for the 13th straight month, reaching the fastest pace since February. Companies also reported the strongest rise in backlogs of work in seven months, aiming to expand capacity and fill vacancies.
Input cost inflation eased to a six-month low but remained elevated by historical standards, with firms citing higher costs for raw materials, oil, labor, and food. Service providers also raised charges, though output price inflation softened from August. The broader Composite PMI, which includes both manufacturing and services, fell to 52.3 in September from 53.5 in August, marking its weakest reading since May.
The Bank of Japan's quarterly “tankan” survey, released on Thursday, showed that manufacturers' confidence hit an eight-year high over July-September, but non-manufacturers' mood soured, painting a mixed picture of the economy.