Business activity growth in Japanese service sector eases in December
Staff Writer |
Japanese service sector business activity continued to expand through the last month of the fourth quarter.
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However, the rate of growth was the weakest for three months.
Softer inflows of new work restricted the increase in output, as demand improved to the slowest extent since July.
Nonetheless, the first rise in outstanding business for four months signalled a return of capacity constraints.
To alleviate operational pressures, employment was increased at an accelerated pace.
Looking ahead, confidence was elevated and held close to November’s recent high.
The headline index from the survey - the seasonally adjusted Business Activity Index - fell to a threemonth low of 51.0 in December, down from 52.3 in November, signalling mild growth of service sector output in Japan.
Poor weather and underwhelming sales at some companies weighed on activity growth.
Meanwhile, manufacturing sector production increased solidly and at the fastest pace since last April.
However, the weaker expansion in Japan’s dominant services sector pulled the Nikkei Composite Output Index down to 52.0 in December, from 52.4 in November.
Latest survey data indicated weaker growth of new orders at service providers.
Overall, the improvement in demand was modest, but reduced workloads at some companies pulled the expansion down to a five-month low.
Also hampering total sales was a weaker increase in new export orders, which grew at just a marginal pace.
Despite demand for services rising at a weaker pace, the improvement was still stronger than the rise in order books at manufacturers.
Overall, private sector sales increased at the weakest rate since July.
Despite the easing of demand pressures, operational capacities at services firms were tested during December, as evidenced by a rise in backlogs of work.
Although the rate of accumulation was only fractional, it was the first time since August that outstanding business had been accumulated.
To ease these pressures, extra staff were recruited in December, continuing a run of job creation that started two years ago.
Moreover, the expansion in staffing levels was the strongest since September and accelerated for a second successive month.
Goods producers also continued to increase their workforces during December, however the rate of employment growth eased to a modest pace.
Japanese service providers maintained an upbeat view on growth prospects over the coming 12 months, with the level of confidence holding close to November’s ten-month peak.
Company expansion, new store openings and projects in the pipeline supported optimism.
Manufacturers were less upbeat than their serviceproviding counterparts in December, with optimism among goods producers easing for a seventh successive month.
Lastly, survey data pointed to cooling cost inflation faced by Japanese service providers.
Input prices increased to the weakest extent since May.
Nonetheless, the rise was still solid overall amid reports of greater transport and labour expenses. ■