Japan private sector expands in November as services lift output

Japan's private sector growth strengthened in November, as resilient services activity outweighed ongoing weakness in manufacturing, figures from S&P Global revealed Monday.

The S&P Global Japan composite purchasing managers' index rose to 52.0 in November from 51.5 in October.

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

Specifically, the services PMI held steady at 53.2 in November from 53.1 in October.

Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said: "Latest PMI data signalled a further modest expansion of private sector output in Japan, as a solid increase in service sector activity offset a slight reduction in factory output.The service sector has now driven growth in each of the past five months, with the latest survey highlighting a number of positive developments."

Business activity picked up in November as new work supported the first rise in order growth in three months, even though export demand continued to fall for a fifth month.

According to S&P Global, companies expressed strong confidence that orders and activity will continue to rise over the coming year. Optimism reached its highest level since January, with many firms expecting stronger demand and planned expansions to lift output.

Fiddes added: "The sustained improvements in activity and new business were accompanied by stronger inflationary pressures, however. Average input costs rose at the sharpest rate since May, which led to another solid increase in selling prices as firms looked to protect their margins."

On Monday, S&P Global reported that Japan manufacturing PMI continued to contract to 48.7 in November from 48.2 in October.

S&P Global compiles the PMI figures monthly using survey responses from around 400 manufacturers and 400 service-sector companies. The flash readings released in advance are typically based on approximately 85% to 90% of the survey respondents.