Japanese Services Sector Growth Slows to 11-Month Low as Cost Surge Hits Optimism
Growth in Japan's services sector moderated to its weakest level in nearly a year in April, as a slowdown in new business intake combined with intensifying cost pressures tested the sector's resilience.The S&P Global Japan Services PMI declined to 51.0 in April from 53.4 in the previous month, the lowest reading in 11 months, according to S&P Global's report released Friday.The latest survey data indicates that the expansion of total new work was the most subdued since last October, contributing directly to the deceleration in business activity.Input costs rose at the sharpest pace seen in 12 months, driven largely by geopolitical tensions and rising energy-related expenses.In response to this sustained cost burden, service providers raised their selling prices to an approaching historic high, marking a near-record increase in output charges.This aggressive pass-through of higher costs to customers underscores the degree of inflationary pressure now present in Japan's service economy.Looking ahead, business confidence regarding the coming year has dimmed considerably, registering the second-lowest level since the onset of the pandemic.Firms cited two primary reasons for their subdued outlook: persistent uncertainty tied to external conflicts, and the ongoing rise in operating costs.The combination of these factors has weighed heavily on optimism, with many companies expressing caution about future demand conditions.Despite the overall expansion extending for a thirteenth consecutive month, as reflected by the headline index remaining above the neutral 50.0 threshold, the pace of growth was only marginal.Finance and insurance, along with transport and storage, were among the few subsectors that continued to show relatively stronger performance amid the broader slowdown.