Service sector activity contracts in Japan for 20 consecutive months

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The service sector across Japan continued to experience a contraction in activity for the 20th consecutive month in September, as restrictions aimed at containing the spread of COVID-19 infections kept consumers wary of spending on services . The final PMI at Jibun Bank Japan Services improved to 47.8 in September from the final reading of 42.9 in August, remaining below the 50 threshold indicating a contraction but revealing a slower pace of contraction.

The improvement in the PMI services index comes as activity and new business show a slower pace of decline than in August. In addition, the employment rate in the Japanese service sector continued to grow for the second consecutive month and even accelerated, with employment growing at the fastest pace in five months.

The industry remained under pressure as COVID-19 cases continued to rise throughout September and the government extended restrictions and restrictions until the end of the month. In addition, external demand has also contracted; however, the rate of decline was lower than that observed in total new business.

Input costs continued to increase for the 10th consecutive month in September, due to higher costs for raw materials, fuel and personnel. Businesses in the service sector passed some of these rising costs on to consumers, as average prices charged for services rose for the fifth time in the past six months in September.

On a positive note, the business climate remained in positive territory and reached the highest levels seen since June, with companies expecting conditions to improve over the next 12 months. The surge in business confidence has been fueled by rising expectations that the pandemic will be successfully brought under control over the coming months through the rollout of vaccines, which in turn could contribute to a rebound in demand.

IHS Markit economist Usamah Bhatti notes: “Japanese private sector companies also noted the strongest cost pressures in 13 years, as supply chain disruption continued to dampen activity. national and global. Price increases were particularly strong for raw materials, personnel and fuel. Regardless of that, companies were optimistic that the pandemic would eventually end in the next 12 months and would boost demand and activity. “


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