Japan’s service sector maintained a strong upturn in business activity in May as price inflation eased from April’s 10-year high. Employment across the sector continued to rise as the 12-month outlook remained relatively strong. Despite price inflation remaining at the 3rd strongest level, demand and input costs picked up, which was evident in the increase in prices. However, the rate of input price inflation eased from April’s eight-month high.
The S&P Global au Jibun Bank Japan Services PMI saw a decline from 54.3 in April to 53.8 in May, signaling a robust rate of expansion, however, at a slightly slower pace.
Business activity maintains positive trend
Japan’s service sector saw an increase in business activity in each month since September 2022 with the strongest growth being in the information & communication sector and the finance & insurance sector. Total new work across the service sector saw a solid increase in May despite the rate of growth easing for the first time in seven months. Demand growth was the fastest in the information & communication sector and the finance & insurance sector. In addition, exports supported the growth in demand as they increased at the strongest pace since September 2014.
Firms across Japan’s service sector saw an increase in new international business, especially in tourism. This led to an increase in employment for the 8th month in a row and an increase in the rate of job creation to almost the fastest pace since 2007.
Business conditions improve
The overall improvement in business conditions in Japan’s service sector led to an increase in optimism to a record high. Hence, higher wages which drove consumer spending, new products and services, a global economic recovery, and the weak yen supported the optimistic outlook.
Read: Asia-Pacific labor markets recover, 87.8 million people out of work: Report
Input price inflation eases
Input price inflation across Japan’s service sector eased since April but remained well above the long-run survey average. Firms saw an increase in input price inflation due to higher wages and rising prices of fuel and imported materials. In addition, average prices in the sector saw a strong increase in May despite inflation easing from April’s 10-year high.
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