Nikkei Japan Services PMI (With Composite PMI Data)

Reading time ( words)

The Japanese service sector began the third quarter with another monthly rise in output, supported by continued growth in new business. In line with upbeat output forecasts, firms increased workforce numbers at the quickest pace in four months.

On the price front, input costs increased at the fastest pace in six months, encouraging businesses to raise output charges to the greatest extent in over four years.

The headline index from the survey—the seasonally adjusted Business Activity Index—edged fractionally lower in July to 51.3, from 51.4 in June, signalling a broadly similar pace of output growth to that seen in the prior survey period. July data stretches the current expansionary sequence into a twenty-second month. That said, the extent of July’s rise was only mild and below the average seen over the current growth period.

A slower pace of expansion in the manufacturing sector was also recorded. Subsequently, the Nikkei Composite Output Index declined to 51.8 in July, from 52.1 in June, pointing to a softer expansion in private sector business activity.

Panellists primarily attributed the rise in output to greater intakes of new work. Survey data indicated that demand has improved in each month for the past two years. According to anecdotal evidence, new store openings and successful contract tendering had helped generate new sales in July.

Order book volumes in the goods-producing sector rose to a noticeably slower extent in July. The rate of expansion was the weakest since October 2016.

Japanese service sector businesses faced greater capacity pressures as a result of rising order book volumes. Outstanding business increased for a second month running during July, however the rate of accumulation was only slight and weakened since June.

With new orders and backlogs of work both rising, service sector businesses retained a positive outlook towards future output in July. The level of positive sentiment strengthened amid forecasts of growing client bases, new product launches and planned job creation.

Meanwhile, confidence among manufacturers weakened to a four-month low, but remained strong overall.

In keeping with demand, Japanese service providers raised operating capacities by recruiting additional staff at the beginning of the third quarter. In fact, the rate employment growth was the fastest for four months. Job creation has been observed since the start of 2017.

A moderate pace of employment growth was sustained in the manufacturing sector during July. The rate of increase slowed fractionally, but remained stronger than that seen in the service sector for a seventh straight survey period.

Labour costs were reported to have risen during July, in line with higher employment and increased salaries. Higher prices for food and fuel were also mentioned by panel members. As such, the rate of input cost inflation quickened to a six-month high and was strong overall.

In response, service-providing companies set higher output charges in an attempt to offset profit margin erosion. Furthermore, the extent to which selling prices were raised was the strongest in 50 months.

Similarly, faster rates of inflation in both input costs and output prices were noted by goods producers during July. Increased fuel prices and higher staffing costs also reportedly impacted profit margins at manufacturers.


Commenting on the Japanese Services PMI survey data, Joe Hayes, economist at IHS Markit, which compiles the survey, said:

“In general, the signal from the July survey was the status quo – business conditions in Japan’s service sector are continuing to improve at a fairly mild pace. Business activity has risen in successive months for almost two years, although the latest reading on the headline figure points to a relatively weak rate of expansion.

“Nonetheless, demand conditions improved to an extent which generated capacity pressures, with panellists pointing to a rise in outstanding business. In turn, this should support further output growth in the coming months. Further positivity can be drawn from the fact that employment growth accelerated to a four-month high, despite reports of rising wage pressures. A stronger degree of business confidence, in tandem with the quickest rate of output price inflation for 50 months, reaffirms the upbeat signal from these forward looking indicators.”

Nikkei Japan Services PMI is sponsored by NIKKEI

Nikkei is a media organization with newspaper publishing at its core. Our flagship daily newspaper, The Nikkei, has approximately two and a half million subscribers. Nikkei's multi-platform media distribution also includes online, broadcast and magazines.

Since our founding in 1876 as the Chugai Bukka Shimpo (Domestic and Foreign Prices News), we have consistently provided high-quality reporting while maintaining fairness and impartiality. The Nikkei brand has become synonymous with trustworthiness at home and abroad.

Nikkei Inc. offers a range of media platforms to satisfy the diverse needs of our readers. At the core of these services is The Nikkei which has a circulation of approximately two and a half million. Adding further depth to our offerings are our premium content and strong digital technology. The number of paying subscribers to the Nikkei Online Edition, which was launched in 2010, has surpassed 500,000. Our fee-based online services have one of the largest readerships in the world among newspaper publishers. Eight years after its creation, the online edition has evolved from a medium for providing news to readers into a tool that helps people advance their careers.

In 2013, we kicked off the Nikkei Asian Review, an English-language news service provided both online and as a weekly print magazine. The following year, we established an Editorial Headquarters for Asia in Bangkok to deepen our coverage of Asian economic news. In addition, we doubled the number of reporters stationed in Asia outside Japan. 2014 also saw the launch of Nikkei Group Asia Pte., a new company in Singapore tasked with spreading the Nikkei brand in the region. Our goal is to make Nikkei the leading media voice in Asia.

About IHS Markit

IHS Markit is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 business and government customers, including 80 percent of the Fortune Global 500 and the world’s leading financial institutions.

About PMI

Purchasing Managers’ Index (PMI) surveys are now available for over 40 countries and also for key regions including the eurozone. They are the most closely-watched business surveys in the world, favoured by central banks, financial markets and business decision makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends.



Suggested Items

Telecom (Compute and Storage) Infrastructure Market to Reach $16.35B in 2022

09/03/2018 | IDC
A new forecast from IDC sizes the market for compute and storage infrastructure for Telecoms at nearly $10.81 billion in 2017. However, as Telecoms aggressively build out their infrastructure, IDC projects this market to see a healthy five-year compound annual growth rate (CAGR) of 6.2% with purchases totaling $16.35 billion in 2022.

Sensor Data Fusion Offers Countermeasures Against Small Drones

09/17/2015 | Airbus Group
Airbus Defence and Space has developed a counter-UAV system which detects illicit intrusions of Unmanned Aerial Vehicles (UAVs) over critical areas at long ranges and offers electronic countermeasures minimizing the risk of collateral damage.

Copyright © 2019 I-Connect007. All rights reserved.