A closely watched private survey released Friday shows Japan’s services sector shifted back into growth mode in June, snapping a brief pause that had stalled activity in May.
The S&P Global final Japan Services Purchasing Managers’ Index, known as the PMI, climbed to 52.2 in June, up from 50.0 in May. Any reading above 50.0 signals that business activity is expanding, while anything below that threshold indicates a slowdown.
The June rebound marked the 14th time in the past 15 months that the sector has registered growth, with May being the lone exception. Even so, the pace of that growth was described as modest and came in slightly below the average rate seen over the past year.
New business coming into service firms increased at one of the fastest rates recorded in the past two years. That growth came despite a continued and notable drop in new business from overseas, which has now declined for three straight months. Some companies pointed to stronger demand in the transportation sector, tied to new product launches and upcoming events.
Cost pressures were a significant concern, with input prices climbing at their steepest rate since June 2022. Higher costs for oil, energy, food, and wages all contributed to that increase. On the other hand, the prices that companies charged their own customers actually eased back from the near-record levels seen in May.
Hiring continued, though at a modest pace. Employment growth picked up slightly from May’s recent low but still fell short of the average seen during a 10-month stretch of payroll increases.
Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, offered this assessment: “Although growth momentum improved, overall business confidence strengthened only slightly in June, as uncertainty over the war and rising expenses weighed on forecasts.”
The broader Composite PMI, which factors in both the manufacturing and services sectors, rose to 52.8 in June from 51.1 in May — the strongest reading in three months.
