A private-sector survey reported on Thursday that the services sector in Japan continued its vigorous expansion in October, although the new orders growth was lowest in 16 months, and inflationary pressures had returned.
The S&P Global final Japan Services Purchasing Managers Index (PMI) also dropped marginally to 53.1 in October, compared to 53.3 in September, and it is the seventh month of consecutive improvement above the 50.0 mark, which distinguishes between development and contraction.
The flash number of 52.4 was exceeded by the October reading, although the headline index registered a strong growth in the activity of the service sector, the sub-index data reflected a slowdown in the growth of new orders to a 16-month low.
This decrease in new orders was accompanied by the fact that foreign demand has declined over the past four months, although at a slow rate since September.
Inflationary pressures were escalated with the increase in the rates of both input costs and output charges, which increased faster in October.
According to the survey, growing costs of labor, raw materials, food, and fuel were cited by the respondents as major factors in the steeper increase in operating expenses.
Therefore, the business confidence had eased since it was at its highest point in eight months. The growth in the service sector accelerated by the second month, though the rate of job creation was slowing down.
Economics Associate Director of S&P Global Market Intelligence, Annabel Fiddes, said that “Firms expressed caution around the outlook and concerns over labour shortages and relatively subdued customer demand.”
The bigger economic outlook revealed that there was a slight expansion in the general business activity because the last S&P Global Japan Composite PMI slightly rose to 51.5 in October, compared to 51.3 in September, and was counterbalanced by a greater drop in factory output.
