Key facts
- Japan's services sector grew at its fastest pace in five months in August.
- The S&P Global final Japan Services PMI increased to 52.5 in August.
- New domestic business demand strengthened, while new export business contracted.
- Employment growth slowed to its lowest pace in a year.
- Input cost inflation eased but output charges increased significantly.
- The Composite PMI, including manufacturing and services, reached a six-month high.
Japan's services sector experienced its most significant expansion in five months during August, according to a survey by S&P Global. The final Japan Services Purchasing Managers' Index (PMI) rose to 52.5, up from 51.2 in July, indicating a strengthening of business activity and new orders, primarily driven by robust domestic demand.
New business orders saw an increase for the 26th consecutive month, benefiting from strong underlying customer demand. However, new export business contracted for the fifth month in a row, marking the sharpest decline since November 2020. Employment in the services sector continued to rise for the 12th consecutive month, albeit at a marginal pace, representing the slowest job creation rate in a year.
Input cost inflation eased to a four-month low, but remained elevated compared to the past three and a half years. Firms responded by increasing output charges at the second-steepest rate on record, passing on costs to clients. Business confidence saw an improvement from July but remained subdued by recent historical standards.
Overall, the broader Composite PMI, which encompasses both manufacturing and services sectors, climbed to 53.5 in August, its highest level in six months, up from 52.7 in July. Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, noted that the data suggests growth momentum picked up in Japan's service sector during August.