Japan Service Sector Expansion Slows in September

S&P Global Market Intelligence reported that Japan's service sector expanded at a slower pace in September, with the Services Purchasing Managers' Index falling to 51.3 from an August high of 52.5. The slowdown resulted from weaker business activity and new orders, influenced in part by demand dampened by earthquake disruptions.

While new orders grew for the 27th consecutive month, export business declined at the second-sharpest rate since January 2021. In contrast, employment grew at its fastest pace since February, and work backlogs reached a seven-month high as firms struggled to fill vacancies. Input cost inflation reached a six-month low but remained elevated due to the costs of labor, food, and oil.

The broader Composite PMI, which includes both manufacturing and services, dropped to 52.3, the lowest level since May. These findings align with a mixed economic outlook from the Bank of Japan's tankan survey, which indicated record-high confidence among manufacturers but declining sentiment among non-manufacturers.