Japan’s Service Activity Expands in December

TOKYO (Reuters) – Japan’s service activity expanded for a second straight month in December, buoyed by solid demand and business expansion, according to a private-sector survey released on Monday.

The final au Jibun Bank Service purchasing managers’ index (PMI) grew to 50.9 in December from 50.5 in November, as reported by S&P Global Market Intelligence. This was lower than a flash reading of 51.4 but remained above the 50.0 threshold that separates expansion from contraction for the second consecutive month.

“December data revealed a positive month for the Japanese service sector, with sustained rises in both business activity and new business,” stated Usamah Bhatti, an economist at S&P Global Market Intelligence.

The subindex of new business increased for the sixth straight month in December, reaching the highest level in four months, primarily driven by the acquisition of new customers from the domestic market.

Employment continued to grow for the 15th consecutive month, although the pace of growth slowed compared to November. Firms indicated they hired more employees in alignment with their business expansion plans.

Business sentiment remained positive in December, although optimism slightly softened from November. Surveyed firms expressed hope for continued demand and activity growth in the upcoming year.

Inflation rates remained unchanged and high in December, primarily due to rising labor and raw material costs. While firms passed higher costs onto clients, the prices charged remained stable compared to the previous month.

The composite PMI, which encompasses both manufacturing and service activity, increased to 50.5 in December from 50.1 in November.

Additionally, data indicated that service-sector inflation rose in November, heightening the Bank of Japan’s rate-hike prospects. BOJ Governor Kazuo Ueda emphasized the need to monitor overseas developments, particularly the policies of the U.S. President-elect Donald Trump.

The BOJ’s next policy meeting is scheduled for January 23-24.