Japan’s service industry expands in July, PMI hits 53.7

Japan’s service sector rebounded in July, with the au Jibun Bank Service Purchasing Managers’ Index (PMI) rising to 53.7 from 49.4 in June. This ended a 21-month contraction streak.

“The near-term outlook for the service sector appears robust, as the level of outstanding business – a bellwether for upcoming work – returned to growth territory,” said Usamah Bhatti, economist at index publisher S&P Global Market Intelligence.

Service companies’ new export business declined for the first time in seven months, indicating sluggish global economic growth.

Japan’s manufacturing sector has been particularly affected by weak overseas demand and increased costs of raw materials, energy, and labour.

Non-manufacturers are also facing rising costs, as shown in the July service PMI data, with input prices increasing for the 44th consecutive month and companies raising prices for customers at a faster rate than in June.

The composite PMI, encompassing both manufacturing and services, also returned to expansionary territory at 52.5. Despite the positive signs, businesses remain cautious about the potential impact of sustained inflation on the economy.

Last week, the Bank of Japan (BOJ) raised interest rates to the highest levels since 2008 in response to rising inflation. Central bank governor Kazuo Ueda signalled potential for further rate hikes in the coming months.

Attribution: Reuters