Japan’s service activity extends gains in Aug, PMI shows By Reuters

TOKYO (Reuters) – Japan’s service-sector activity extended gains in August, a private sector survey showed on Wednesday, thanks to an uptick in overseas sales despite a darkening global outlook.

The final au Jibun Bank Service purchasing managers’ index (PMI) was unchanged at 53.7 last month, staying above the 50.0 line that separates expansion from contraction for a second consecutive month.

While the headline figure was in line with July’s reading, service companies’ new business growth slowed from the previous month.

But export sales rebounded from a contraction in July to the largest rise in three months, supporting overall service-sector business.

That marks a contrast to Japan’s manufacturing PMI for August released on Monday, which indicated the weakest exports in five months on weak demand in China, South Korea and other key markets.

Recent government data showed Japan’s export growth missed expectations in July, suggesting growing risks of further deceleration due to a stronger yen and softer conditions.

Weak global demand poses a challenge for sustainable economic growth and the Bank of Japan’s policy tightening, which has signalled more rate hikes if the economy and inflation keep up with its forecasts.

The August PMI data also showed the slowest service price inflation in nine months. Growth of service-sector employment and business optimism also hit seven- and 19-month lows, respectively.

The composite PMI, which combines the manufacturing and service activities, rose to 52.9 in August from 52.5 in the previous month, thanks to a recovery in manufacturing output, according to the survey.

„Sustained service sector growth and a renewed expansion in manufacturing output contributed to a stronger improvement in the health of the Japanese private sector economy,” which marked the fastest growth since May 2023, said economist Usamah Bhatti at the survey compiler S&P Global Market Intelligence.