Japan Services PMI Rises to 51.7 as Composite Gauge Hits Five-Month Low

Japan’s services sector expanded for a fifth consecutive month in October, but a weaker composite reading showed broader private-sector growth slowed to its lowest pace since May.

The final au Jibun Bank Japan Services PMI stood at 51.7 index points, up 0.4 point from September’s 51.3 but below the 52.0 flash estimate. The result extended the sector’s expansion streak to five months. PMI readings are diffusion indexes: a score above 50 signals an increase from the previous month, not a percentage growth rate.

The Composite Output Index eased 0.2 point to 52.1 from 52.3, its weakest reading since May. It combines services activity and manufacturing output, weighted by the sectors’ relative contributions to gross domestic product. The index remained above 50, signaling expansion, but slower manufacturing output offset faster growth in services.

Services new orders rose for a 28th consecutive month, with growth picking up from September. Stronger domestic demand, new customers and efforts to develop business helped lift orders. Foreign demand remained weak: new export orders continued to decline, though the drop was the least severe since April. The survey therefore showed expanding overall services orders alongside continued weakness in export business.

Services employment increased only marginally, the weakest pace in the current 14-month hiring stretch. Business confidence fell to its lowest level since March. Services input-price inflation slowed for a fourth straight month to an eight-month low, while output-price inflation also moderated.

“Whether growth loses further momentum and cost pressures ease will be important considerations for the Bank of Japan as it assesses further policy tightening,” said Annabel Fiddes, economics associate director at S&P Global Market Intelligence.