TOKYO (dpa-AFX) - Japan's service sector expanded at a slower pace in September due to weaker increase in business activity and sales, final purchasing managers' survey results from S&P Global showed Monday.
The final services Purchasing Managers' Index fell to 51.3 in September from a five-month high of 52.5 in August. The flash score was 51.6. Nonetheless, a score above 50.0 indicates expansion.
Customer demand was softer than expected in September, while new export business continued to fall markedly. Service providers added more staff at a quicker pace in line with the rise in backlogs of work.
Further, optimism towards the 12-month outlook for business activity hit the highest level since June.
Input costs continued to increase sharply but the rate of inflation slid to a six-month low. Prices charged by services companies increased again at one of the sharpest rates in the survey history.
'The price indicators therefore point to further upward pressure on official consumer price inflation, which stood at 1.9% in August, only just below the Bank of Japan's 2% target,' S&P Global Market Intelligence Economics Associate Director Annabel Fiddes said.
'Combined with the relatively strong growth picture, this suggests that the Bank could raise rates again, potentially at its October meeting,' Fiddes added.
Japan's total business activity grew at the softest rate in four months in September. The composite output index dropped to 52.3 from 53.5 in the previous month. The reading was below the flash estimate of 52.5.
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