TOKYO (Reuters) -Growth in Japan’s service-sector activity slowed in May on weaker demand, offering little to mitigate falling factory activity and resulting in a near-zero growth for business overall, a private sector survey showed on Wednesday.
The final au Jibun Bank Japan Services purchasing managers’ index (PMI) fell to 51.0 in May from 52.4 in April, although it was higher than flash 50.8. An index reading above the 50.0 threshold indicates growth and a reading below indicates contraction.
New business growth in the service sector eased to its slowest pace since November, while employment growth in services was the weakest rate since December 2023, the survey showed.
Service-sector managers’ confidence in their future outlook improved to a three-month high in May from April’s four-year low, but the overall level stayed weaker than the post-pandemic average, according to the survey.
“Concerns over the outlook often stemmed from uncertainty over future global demand, as well as labour shortages and rising costs,” said Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, which compiled the survey.
“The latter was highlighted by a further steep increase in input prices, to suggest that official inflation data will remain strong.”
Input price inflation eased from April’s 26-month high but remained elevated, with managers citing higher costs for energy, labour and transport, prompting service providers to continue raising their output charges roughly in line with April’s pace.
The slowdown in services, combined with a continued decrease in manufacturing, left overall private sector activity stagnant with the composite PMI dropping to 50.2 in May from 51.2 in April.
“The weaker demand picture suggests that the private sector may struggle to bounce back in the near-term, and could translate into more cautious staff hiring in the months ahead,” Fiddes said.
(Reporting by Kantaro Komiya; Editing by Sam Holmes)
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