Japan's service sector grows at a slower rate in December

Japan's private sector expansion eased in December as growth in the services sector underperformed expectations, S&P Global reported Wednesday.

The S&P Global Japan composite purchasing managers' index fell to 51.1 points in December from 52.0 in November, coming in below the preliminary flash reading of 51.5.

A reading above the 50-point neutral mark indicates an overall increase in business activity from the previous month, while a reading below signals a contraction.

Specifically, the Japan services PMI slipped to 51.6 points in December from 53.2 in November, missing the flash reading of 52.5.

On Monday, S&P Global said the manufacturing PMI rose to 50.0 points in December from 48.7 in November, surpassing the flash reading of 49.7.

Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said: "While services companies registered slower increases in both activity and new orders, there was a relative improvement in manufacturing sector performance. Factors signalled broadly stable output levels in December, following a five-month period of decline, while new orders fell at the slowest rate for just over a year-and-a-half."

Although the latest data indicates a loss of momentum in Japan's service sector, survey responses suggest that business confidence remains strong. S&P Global said service providers were "generally confident" that there would be an increase in business activity over the next year, driven by new product launches, store opening, and greater demand from clients.

Furthermore, staff hiring in the service sector continued its upward trend in the final month of 2025 as employment grew at the quickest rate since May 2023.

"Cost pressures continued to intensify in December, with panel members noting higher prices for raw materials, staff, equipment, fuel and construction. Overall, the rate of input cost inflation was the sharpest recorded since May and was well above the series average. Consequently, selling prices also rose at a historically strong and solid rate," S&P Global explained.

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 PMI and manufacturing output index.