Japan services sector expands solidly in September

Investing.com -- Japan’s services sector continued to expand at a solid pace in September, with the S&P Global Japan Services Business Activity Index rising to 53.3 from 53.1 in August, according to data released Friday.

The latest reading marked the second-strongest growth rate since February and extended the current expansion streak to six months.

The Finance & Insurance category emerged as the top performer, with all industries except Real Estate & Business Services recording improved business activity.

New business continued to expand at a solid pace, unchanged from August, as companies reported successful business development efforts and new client acquisitions boosting sales. However, foreign demand for Japanese services declined further.

The sustained growth in activity and sales encouraged service providers to increase their workforce numbers in September, marking the first employment expansion in three months, albeit at a marginal rate.

Despite this hiring, pressure on capacity persisted, with outstanding business continuing to accumulate, though at a slower pace than August’s 26-month record.

Input cost inflation remained sharp despite easing from the previous month, with companies citing higher labor, raw material, and fuel costs. In response, service providers continued to raise their selling prices at a solid rate.

Business confidence improved to an eight-month high, with firms expressing optimism about planned expansions, new product releases, and increased customer spending over the next 12 months.

The broader S&P Global Japan Composite PMI Output Index, which includes manufacturing, declined to 51.3 in September from August’s six-month high of 52.0, indicating the slowest growth rate since May. The solid rise in services activity was partially offset by a steeper drop in factory output.

New business at the composite level expanded at a softer, marginal pace, while foreign demand for Japanese goods and services declined for the sixth consecutive month. Employment across the private sector rose to a three-month high, driven by service sector hiring.

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