Tokyo— The most recent S&P Global final Japan Services purchasing managers’ index (PMI) shows that Japan’s service sector grew at a slower pace in August. The index, which is an important indicator of how well the economy is doing, fell from 53.6 in July to 53.1. The reading is still above 50.0, which means that the economy is growing, but it is growing more slowly than it did last month.
The survey showed that the industry was doing well because new business was growing quickly, with total new orders rising at their quickest rate since February. But much of this growth came from demand within the country. New export business fell at its fastest rate in more than three years, showing that it is hard to get international clients. “The data also suggests that the upturn was largely driven by stronger domestic demand, as new export business declined again,” says Annabel Fiddes, an economics associate director at S&P Global Market Intelligence.
Another important finding was that service sector jobs declined somewhat for the first time since September 2023, with employers saying that employees quit. The number of staff members going down, along with the amount of work they had to do, caused the biggest rise in backlogs in more than two years.
Even though input costs went up a lot, they did so at a faster rate than they had in 17 months in July. Because of this, businesses couldn’t raise their prices very much, which hurt their operating margins.
Service companies said they were more confident about their businesses in the coming year because they planned to grow and expected increased demand from customers both at home and abroad. This strength in the service sector helped make up for the fact that Japan’s manufacturing sector was still poor, which led to more business activity overall. Because of this, Japan’s composite PMI, which includes both sectors, went up from 51.6 in July to 52.0 in August. This was the biggest overall gain since February.