Key facts
- Japan's services sector activity stagnated in May, with the PMI falling to 50.0.
- This marks the end of a 13-month expansion streak for the services sector.
- New business growth slowed, with new export business falling sharply.
- Input prices rose at the fastest rate in over three years, driven by fuel, energy, and raw material costs.
- Service providers raised selling prices at the fastest pace since April 2014.
- Employment growth slowed to its weakest rate in nine months.
Japan's services sector activity stagnated in May, ending a 13-month expansion streak as it registered a Purchasing Managers' Index (PMI) of 50.0, down from 51.0 in April. This slowdown was attributed to surging costs, particularly for fuel and energy, linked to the Middle East war, which dampened service demand. Input prices rose at their fastest rate in over three years, prompting service providers to increase selling prices at the quickest pace since April 2014. New business growth slowed for the third consecutive month, reaching its weakest point in nearly two years, with new export business experiencing its sharpest decline since March 2022. Employment growth also moderated to a nine-month low. The broader Japan Composite PMI, which includes manufacturing, fell to 51.1 in May from 52.2 in April, indicating the slowest growth in five months. This slower growth in manufacturing is partly due to temporary stock building, which is expected to diminish if global economic conditions remain fragile.