Japan services PMI rises to 51.7 as expansion extends to fifth month

Japan’s services sector recorded a fifth consecutive month of growth in October, with S&P Global’s final services Purchasing Managers’ Index rising to 51.7 from September’s 51.3. Activity and new orders increased at slightly faster rates, the survey showed.

The final index was below the preliminary reading of 52.0 but remained above 50, the dividing line between expansion and contraction. New orders grew for the 28th month in succession, supported by what firms described as stronger domestic demand, client wins and business development efforts.

Overseas demand was still weak, although export orders declined at their slowest rate since April. Input price inflation slowed for a fourth consecutive month, reaching an eight-month low. Selling-price inflation also eased, but companies continued a four-and-a-half-year stretch of monthly price increases.

Confidence dropped to its weakest level since March. Worries about inflation, population aging and labor shortages weighed against optimism linked to defense, technology, expansion plans and tourism. Employment increased only marginally, the slowest hiring pace in the current 14-month run of gains, as resignations and retirements constrained staffing growth.

Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said continued inflation could limit demand and hiring. She said the course of growth and cost pressures would be important to the Bank of Japan’s assessment of further policy tightening.

The composite output index fell to 52.1 from 52.3, indicating the slowest expansion since May. A manufacturing slowdown offset the stronger services performance.