Japan Service Sector Eases In July - Nikkei
August 04 2015 - 11:05PM
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The services sector in Japan remained in expansion in July,
albeit at a slower pace, the latest survey from Nikkei revealed on
Wednesday with a PMI score of 51.2.
That's down from 51.8 in June, although it remains well above
the boom-or-bust level of 50 that separates expansion from
contraction.
The composite index came in with a score of 51.5 - unchanged
from the previous month.
"Activity at Japanese services expanded for the fourth straight
month in July, underpinned by a further expansion in new orders. In
fact, growth in new business accelerated to a 26-month high, with
panelists mentioning successful gains in new clients. Subsequently,
employment levels increased, reversing the decline observed in the
prior month," said Markit economist Amy Brownbill.
New business growth accelerated to a 26-month peak, supporting
further expansions in activity and employment. Meanwhile, both
input and output prices rose at sharper rates in comparison to the
prior month. A rise in new work at Japanese services firms helped
to boost activity growth in July, while new order growth resumed in
the manufacturing sector in July.
As a result of expansions in both activity and incoming new
work, pressure on capacity was recorded at Japanese services
companies in July. Although moderate, the rate of accumulation in
backlogs was the fastest since April. Responding to activity and
new order growth, service sector providers hired additional staff
in July. Firms linked greater staffing levels to business
expansions and the belief that activity will increase in the
future.
On the price front, input prices at Japanese services firms rose
at the fastest rate since December 2014. Reports of higher staff
wages, raw material costs and fuel expenses all contributed to
greater cost burdens. Subsequently, service sector charges rose at
the quickest rate since September last year. Finally, prospects
towards service activity growth over the coming 12 months remained
positive in July.
"Meanwhile, business sentiment towards activity over the coming
year strengthened in July. Furthermore, the degree of confidence
was the strongest since April. Several panelists mentioned
expectations of new business wins and an increase in new orders as
factors behind the latest optimism. Moreover, some mentioned
greater demand generated from preparations related to the hosting
of the Olympic Games in 2020," Brownbill said.