Japan’s services sector expanded at its fastest pace in five months in August as stronger domestic demand lifted business activity and new orders, according to the latest S&P Global PMI survey.
The S&P Global final Japan Services Purchasing Managers’ Index (PMI) climbed to 52.5 in August from 51.2 in July, remaining above the 50 mark that separates expansion from contraction.
New business increased for the 26th consecutive month and grew at a faster pace than in July, supported by stronger underlying customer demand. However, new export business remained under pressure, contracting for a fifth straight month at its sharpest rate since November 2020.
Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, said the latest figures pointed to a stronger services sector.
“The latest PMI data suggests that growth momentum picked up across Japan’s service sector in August,” Fiddes said.
The stronger activity also comes as cost pressures remain elevated. Input cost inflation eased to a four-month low but was still among the fastest recorded over the past three-and-a-half years.
Firms continued to pass higher costs on to customers, with output charges rising at the second-steepest pace on record.
Fiddes said the continued pressure on costs could keep inflation elevated in the months ahead and strengthen the case for further monetary policy tightening by the Bank of Japan.
“The sustained cost pressures indicate official inflation could rise further in the coming months and, alongside stronger growth, strengthens the case for another Bank of Japan interest rate hike,” she said.
Employment in the services sector also increased for a 12th consecutive month, although the pace of job creation was marginal and the slowest in a year.
Business confidence improved from July but remained subdued compared with recent levels.
Meanwhile, the broader Composite PMI, which combines manufacturing and services activity, rose to 53.5 in August from 52.7 in July. It marked the strongest pace of expansion in six months.
Reuters
