A business survey released on Monday showed that the pace of expansion in Japan's services sector slowed in September, as growth in business activity and new orders weakened, with earthquake-related disruptions also dampening demand. The S&P Global survey showed that the final reading of Japan's September Services Purchasing Managers' Index (PMI) fell to 51.3 from a five-month high of 52.5 in August, below the preliminary reading of 51.6. The PMI uses 50 as the threshold between expansion and contraction, with a reading above 50 indicating expansion and below 50 indicating contraction. Annabel Fiddes, Associate Director of Economics at S&P Global Market Intelligence, said: "The PMI survey data showed that as the third quarter drew to a close, the expansion momentum in Japan's services sector weakened, with companies reporting slower growth in both business activity and new orders."
New orders in the services sector rose for a 27th consecutive month, but the pace of growth slowed compared with August. S&P Global noted that strong domestic demand continued to support sales, while new export business fell again, posting its second-largest decline since January 2021. The survey showed that services employment rose for a 13th straight month, with the pace of job creation the fastest since February. Meanwhile, companies reported the largest increase in outstanding business in seven months, reflecting efforts to expand capacity and fill job vacancies.
Input cost inflation eased to a six-month low, though it remained elevated by historical standards, with firms widely citing higher costs for raw materials, oil, labor, and food. Charges levied by service providers were raised again, although the rise in output prices moderated from August. The composite PMI for Japan, covering both manufacturing and services, fell to 52.3 in September from 53.5 in August, the lowest level since May.
The Bank of Japan's quarterly Tankan survey released last Thursday showed that confidence among Japanese manufacturers rose to an eight-year high in the July-to-September period, while sentiment among non-manufacturers deteriorated, reflecting mixed economic conditions.