Japan’s service sector continued its expansion for the second consecutive month in December, driven by robust demand and business growth, according to a private sector survey released on Monday. The final au Jibun Bank Service Purchasing Managers’ Index (PMI), compiled by S&P Global Market Intelligence, registered 50.9 in December, a slight increase from November’s 50.5.
While the final figure was slightly lower than the preliminary flash reading of 51.4, it remained above the crucial 50.0 mark that separates expansion from contraction. This sustained growth indicates a positive trend for the Japanese service sector.
According to Usamah Bhatti, an economist at S&P Global Market Intelligence, December’s data points to a positive month for Japanese services, with consistent growth observed in both business activity and new business. This continued expansion signals a healthy and resilient service sector.
The survey highlighted a significant increase in new business for the sixth consecutive month in December, reaching a four-month high. This surge in new business was primarily attributed to the acquisition of new customers, particularly within the domestic market. This signifies a strengthening domestic demand for services.
The service sector also experienced continued job growth for the 15th month running, although the pace of hiring slowed down compared to November. Surveyed companies reported increased hiring in line with their business expansion plans, indicating a positive outlook for future growth.
Business sentiment remained optimistic in December, despite a slight dip in confidence compared to the previous month. Businesses expressed hope for continued growth in demand and activity in the coming year. This sustained optimism suggests a positive outlook for the service sector’s performance in the near future.
Inflation remained stable but high in December, primarily driven by rising labor and raw material costs. Companies continued to pass on these increased costs to consumers, resulting in a steady rate of price increases. This persistent inflationary pressure may pose a challenge for the sector’s sustained growth.
The composite PMI, which combines both manufacturing and service sector activity, also showed improvement, rising to 50.5 in December from 50.1 in November. This overall growth further strengthens the positive outlook for the Japanese economy.
Recent data indicating a rise in service-sector inflation in November could influence the Bank of Japan’s (BOJ) decision on interest rates. BOJ Governor Kazuo Ueda emphasized the importance of monitoring global economic developments, particularly the policies of incoming US administrations. The BOJ’s next policy meeting is scheduled for January 23-24. The outcome of this meeting will be crucial for the future direction of monetary policy in Japan.
In conclusion, Japan’s service sector demonstrated resilience and growth in December, fueled by strong demand, business expansion, and a positive outlook for the future. While inflationary pressures and global economic uncertainties remain, the continued expansion of the service sector contributes significantly to the overall health of the Japanese economy.
