TOKYO (Reuters) – Japan’s service activity rose for a second straight month in December, boosted by solid demand and business expansion, a private sector survey showed on Monday.
The final Purchasing Managers’ Index (PMI) at Jibun Bank Service rose to 50.9 in December from 50.5 in November, according to a survey compiled by S&P Global Market Intelligence.
It was lower than the flash reading of 51.4, but remained above the 50.0 threshold separating expansion from contraction for the second straight month.
“December data revealed a positive month for Japan’s services sector, with business activity and new jobs continuing to grow,” said Usamah Bhatti, economist at S&P Global Market Intelligence.
The new business sub-index rose for the sixth month in a row in December and reached the highest level in four months, led by acquisitions of new customers, especially from the domestic market, the survey showed.
Employment rose for the 15th straight month, although the pace of growth has slowed since November. Companies in the survey said they hired more employees in line with business expansion plans.
Business sentiment remained positive in December, although the level of optimism weakened slightly compared to November. Companies in the survey hope that demand and activity will grow over the next year.
The inflation rate remained unchanged and remained high in December, mostly due to the rise in labor and raw material costs. Companies passed on higher cost burdens to clients, although the rate of charged prices also remained unchanged in December compared to the previous month.
The composite PMI, which combines manufacturing and services activities, rose to 50.5 in December from 50.1 in November.
Data showed that inflation in the services sector rose in November, boosting the Bank of Japan’s chances of raising interest rates. BOJ Governor Kazuo Ueda said that the bank must monitor developments abroad, especially the policies of the newly elected US President Donald Trump.
The BOJ is holding its next policy meeting on January 23 and 24.
