Japan’s PMI data signals cooling momentum across manufacturing and services

Japan's services sector growth slowed in September, falling below expectations according to the S&P Global Japan Services Purchasing Managers' Index (PMI). The services business activity index dropped to 51.3, missing economists' forecast of 51.6. Despite this, the index remained above the 50 threshold, indicating growth. The slowdown was attributed to weaker gains in business activity and new orders, which were affected by softer-than-expected customer demand and disruption from the Kumamoto earthquake.

Employment in the sector, however, remained positive, with service-sector payrolls increasing for the 13th consecutive month at the fastest pace since February. Inflationary pressures remained elevated, but the rate of input-cost growth eased to a six-month low. Business confidence showed signs of improvement, with optimism about the 12-month outlook reaching its highest level since June.

The weaker services reading contributed to a slowdown in overall private-sector growth, with the S&P Global Japan Composite Output Index falling to 52.3 in September, its slowest pace of expansion in four months.

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