Japan service sector expands in October despite weaker foreign demand

Japan's services activity remained strong in October and expanded ahead of flash estimates, S&P Global reported Thursday.

The S&P Global Japan composite purchasing managers' index rose to 51.5 in October from 51.3 in September, surpassing the previously released flash reading of 50.9.

A reading above the 50.0 neutral mark indicates an overall increase in business activity from the previous month, while a reading below signals a contraction.

Specifically, the services PMI edged down to 53.1 in October from 53.3 in September, above the 52.4 flash reading.

Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said: "[Services sector] new business growth slowed sharply, with sales expanding at the weakest pace in 16 months, and foreign demand continued to contract.

"Nevertheless, the service sector continued to drive overall growth of Japan's private sector in October, offsetting another reduction in factory output. Employment also increased further. However, price pressures have intensified across both sectors, and will be important to monitor in the coming months."

On Tuesday, S&P Global said the manufacturing PMI fell to 48.2 in October from 48.5 in September, below the 48.3 flash reading.

Service providers attributed input cost increases to staff, raw material, food, and fuel, prompting companies to raise selling prices at the steepest rate since June.

While optimism that business activity will rise over the next year remains, the degree of confidence has reduced, with firms expressing concern over subdued demand and labour shortages.

S&P Global compiles the PMI figures each month using survey responses from a panel of around 400 service sector companies and 400 manufacturers. The composite figure is a weighted average of the services and manufacturing indices.