The services activity in Japan expanded further in August, a private sector survey showed on Wednesday, helped by overseas sales as it gained an edge despite the darkening global outlook.

The final au Jibun Bank Services Purchasing Managers' Index (PMI) came in at 53.7 last month, unchanged from the initial reading and above the 50.0 line, separating expansion from contraction for the second month in a row.

The headline figure was aligned with July's reading, but service companies saw a slowdown in new business growth compared to the previous month.

However, export sales rebounded from a contraction in July to the largest rise in three months, supporting overall service-sector business.

That contrasts sharply with Japan's August manufacturing PMI, released on Monday, which pointed to the weakest exports in five months due to weak demand in China, South Korea, and other major markets.

Recent data released by the government showed that Japan's export growth was below expectations in July, underlining growing risks of further deceleration due to a stronger yen and softer conditions.

Weak global demand is clouding the prospect for sustainable economic growth, while the Bank of Japan policy tightening has promised more rate hikes if the economy and inflation match up to its forecasts.

The August PMI data also showed service price inflation at its slowest in nine months. Service-sector employment growth and business optimism also hit seven- and 19-month lows, respectively.

The composite PMI rose to 52.9 in August from 52.5 the previous month, helped by a rebound in manufacturing output, the survey showed.

"Sustained service sector growth and a renewed expansion in manufacturing output contributed to a stronger improvement in the health of the Japanese private sector economy," which marked the fastest growth since May 2023, said economist Usamah Bhatti at the survey compiler S&amp;P Global Market Intelligence.

The services activity in Japan expanded further in August, a private sector survey showed on Wednesday, helped by overseas sales as it gained an edge despite the darkening global outlook.

The services activity in Japan expanded further in August, a private sector survey showed on Wednesday, helped by overseas sales as it gained an edge despite the darkening global outlook. The final au Jibun Bank Services Purchasing Managers' Index (PMI) came in at 53.7 last month, unchanged from the initial reading and above the 50.0 line, separating expansion from contraction for the second month in a row. The headline figure was aligned with July's reading, but service companies saw a slowdown in new business growth compared to the previous month. However, export sales rebounded from a contraction in July to the largest rise in three months, supporting overall service-sector business. That contrasts sharply with Japan's August manufacturing PMI, released on Monday, which pointed to the weakest exports in five months due to weak demand in China, South Korea, and other major markets. Recent data released by the government showed that Japan's export growth was below expectations in July, underlining growing risks of further deceleration due to a stronger yen and softer conditions. Weak global demand is clouding the prospect for sustainable economic growth, while the Bank of Japan policy tightening has promised more rate hikes if the economy and inflation match up to its forecasts. The August PMI data also showed service price inflation at its slowest in nine months. Service-sector employment growth and business optimism also hit seven- and 19-month lows, respectively. The composite PMI rose to 52.9 in August from 52.5 the previous month, helped by a rebound in manufacturing output, the survey showed. "Sustained service sector growth and a renewed expansion in manufacturing output contributed to a stronger improvement in the health of the Japanese private sector economy," which marked the fastest growth since May 2023, said economist Usamah Bhatti at the survey compiler S&P Global Market Intelligence.

Japan's services sector grows despite global challenges

Japanese manufacturers grew more confident about business conditions in July, while sentiment in the service sector dulled, a Reuters monthly Tankan poll showed on Wednesday. This transmits a mixed economic outlook with varied sectoral performance.

The survey, which captured responses from 506 large non-financial firms, came out just two weeks ahead of the policy review by the Central Bank of Japan on July 30-31. Much attention is now focused on the BOJ for hints on impending interest rate hikes as the central bank raised rates in March for the first time since 2007 and trimmed bond-buying last month.

The BOJ will keep a close watch on its own tankan survey, short-term outlook data, and indications from other leading economic indicators that could confirm the sustainability of inflation and strong household consumption—perhaps driven by wage hikes. This could mediate their case for further rate hikes.

The Reuters Tankan survey, which closely tracks the BOJ's tankan, demonstrated that the sentiment index for manufacturers jumped by five points from June to stand at plus 11, and also the first rise in four months. However, manufacturers said pessimism is yet to fully flee as they predict the index will fall over the next three months to plus 9.

"Domestic price hikes have weakened consumption and a slowing Chinese economy has caused China-bound materials from the Middle East to make inroads into the Japanese market at low prices," a manager at a chemicals manufacturer wrote in the Reuters poll, conducted July 2-12, on condition of anonymity.

"The double punches of weak domestic demand and cheap import materials from overseas are curbing our sales volume."

A food processing company manager wrote: "Input prices have risen and remain elevated due to the weak yen as we struggle to transfer costs to our customers."

The Reuters Tankan index for the service sector slipped to plus 27 from plus 31, its first fall in three months. Non-manufacturers expect the index to inch up to plus 28 by October.

The Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic respondents from optimistic ones. A positive reading indicates a heftier number of optimists than pessimists.

Japanese manufacturers grew more confident about business conditions in July, while sentiment in the service sector dulled, a Reuters monthly Tankan poll showed on Wednesday.

Japanese manufacturers grew more confident about business conditions in July, while sentiment in the service sector dulled, a Reuters monthly Tankan poll showed on Wednesday. This transmits a mixed economic outlook with varied sectoral performance. The survey, which captured responses from 506 large non-financial firms, came out just two weeks ahead of the policy review by the Central Bank of Japan on July 30-31. Much attention is now focused on the BOJ for hints on impending interest rate hikes as the central bank raised rates in March for the first time since 2007 and trimmed bond-buying last month. The BOJ will keep a close watch on its own tankan survey, short-term outlook data, and indications from other leading economic indicators that could confirm the sustainability of inflation and strong household consumption—perhaps driven by wage hikes. This could mediate their case for further rate hikes. The Reuters Tankan survey, which closely tracks the BOJ's tankan, demonstrated that the sentiment index for manufacturers jumped by five points from June to stand at plus 11, and also the first rise in four months. However, manufacturers said pessimism is yet to fully flee as they predict the index will fall over the next three months to plus 9. "Domestic price hikes have weakened consumption and a slowing Chinese economy has caused China-bound materials from the Middle East to make inroads into the Japanese market at low prices," a manager at a chemicals manufacturer wrote in the Reuters poll, conducted July 2-12, on condition of anonymity. "The double punches of weak domestic demand and cheap import materials from overseas are curbing our sales volume." A food processing company manager wrote: "Input prices have risen and remain elevated due to the weak yen as we struggle to transfer costs to our customers." The Reuters Tankan index for the service sector slipped to plus 27 from plus 31, its first fall in three months. Non-manufacturers expect the index to inch up to plus 28 by October. The Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic respondents from optimistic ones. A positive reading indicates a heftier number of optimists than pessimists.

Japanese manufacturers show increased confidence while service sector sentiment declines

A private sector survey data shows that Japanese services activity in June contracted for the first time since August 2016, largely because of easing domestic demand. Notwithstanding the contraction, business confidence and hiring indicators rub off a positive note.

The service sector has turbocharged Japan's economy and so far has cushioned the blow from a poor performance in the manufacturing sector. The final au Jibun Bank Service Purchasing Managers' index (PMI) slid to 49.4 in June from 53.8 in May, bringing a 21-month streak of growth to an abrupt halt, the S&amp;P Global Market Intelligence survey showed. The PMI was weaker than the preliminary figure of 49.8 and the first reading below the 50.0 threshold separating expansion from contraction since August 2022.

Trevor Balchin, economics director at S&amp;P Global Market Intelligence, commented June's decline in new business simply reflects a pause in growth, rather than any great fall in demand.&nbsp;

"Looking beyond the headline figure, the picture is less concerning," Balchin said.

Consumer services, finance and insurance, and real estate and business services were all seeing a fall in demand, but transports and storage together with information and communication rose in June. Meanwhile, the weak yen-the currency has lost over 12 per cent so far this year-boosted foreign demand for Japanese services.

While still broadly positive, at a slower pace, the 12-month outlook for employment and business confidence grew. At the same time, rising wages and food and fuel costs, along with the weaker yen, firmed up the input price increases, driving through the fastest rate of inflation since last August.

Companies continued to pass on price hikes to consumers against the backdrop of higher wages and material costs, and the pace of growth of average prices charged remained close to record levels seen in April and May.

The composite PMI, which combines manufacturing and services activity figures, fell to 49.7 in June from 52.6 in May indicating the first reading below the 50.0 level in seven months.

The economy now approaches a critical juncture, dependent as it has been on services to balance out a weak manufacturing sector, following the recent Japanese service sector contraction. In addition, the au Jibun Bank Service PMI final reading dropped to 49.4 in June, which signals no growth, even though business confidence and hiring indicators showed resilience and thus held some potential for recovery. However, these might be constrained by rising input costs and inflation. As these continue to be passed on to consumers from companies, the economic landscape will balance inflationary pressures with sustainable growth.

A private sector survey data shows that Japanese services activity in June contracted for the first time since August 2016, largely because of easing domestic demand.

A private sector survey data shows that Japanese services activity in June contracted for the first time since August 2016, largely because of easing domestic demand. Notwithstanding the contraction, business confidence and hiring indicators rub off a positive note. The service sector has turbocharged Japan's economy and so far has cushioned the blow from a poor performance in the manufacturing sector. The final au Jibun Bank Service Purchasing Managers' index (PMI) slid to 49.4 in June from 53.8 in May, bringing a 21-month streak of growth to an abrupt halt, the S&P Global Market Intelligence survey showed. The PMI was weaker than the preliminary figure of 49.8 and the first reading below the 50.0 threshold separating expansion from contraction since August 2022. Trevor Balchin, economics director at S&P Global Market Intelligence, commented June's decline in new business simply reflects a pause in growth, rather than any great fall in demand. "Looking beyond the headline figure, the picture is less concerning," Balchin said. Consumer services, finance and insurance, and real estate and business services were all seeing a fall in demand, but transports and storage together with information and communication rose in June. Meanwhile, the weak yen-the currency has lost over 12 per cent so far this year-boosted foreign demand for Japanese services. While still broadly positive, at a slower pace, the 12-month outlook for employment and business confidence grew. At the same time, rising wages and food and fuel costs, along with the weaker yen, firmed up the input price increases, driving through the fastest rate of inflation since last August. Companies continued to pass on price hikes to consumers against the backdrop of higher wages and material costs, and the pace of growth of average prices charged remained close to record levels seen in April and May. The composite PMI, which combines manufacturing and services activity figures, fell to 49.7 in June from 52.6 in May indicating the first reading below the 50.0 level in seven months. The economy now approaches a critical juncture, dependent as it has been on services to balance out a weak manufacturing sector, following the recent Japanese service sector contraction. In addition, the au Jibun Bank Service PMI final reading dropped to 49.4 in June, which signals no growth, even though business confidence and hiring indicators showed resilience and thus held some potential for recovery. However, these might be constrained by rising input costs and inflation. As these continue to be passed on to consumers from companies, the economic landscape will balance inflationary pressures with sustainable growth.

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