Japan’s service sector output shrinks in April

Japan’s service sector output has declined slightly. For the first time since March, business activity fell, although new orders were widely stable. Employment index rose slightly, countering March’s drop. Meanwhile, cost inflation alleviated to the weakest in 14 months, while charges increased marginally. Services companies in Japan were quite upbeat last month, noted Markit. The degree of confidence rose to the strongest level since August 2015.

Japan’s seasonally adjusted Business Activity Index fell to 49.3 in April. This shows that output at services companies in Japan contracted in April. A decline in clients resulted in the activity to deteriorate, according to panellists. Meanwhile, new business at the services companies rose slightly in April. But the growth rate was slower than the average seen in 2016 until now.

In the mean time, Japan’s manufacturers’ production fell sharply last month. The Nikkei Composite Output Index fell further below 50 to 48.9 in April, reflecting contractions in Japan’s service sector and manufacturers’ output. The April’s reading was the lowest in two years.

Services firms in Japan on average hired more workers last month in spite of a decline in business activity. But the overall job creation rate was just marginal. Goods producers hired workers for the seventh consecutive month. Meanwhile, weak demand, along with a rise in the number of staff resulted in less pressure on capacity at the services companies in Japan and a further decline in volumes of business outstanding.

In April, the services companies’ input prices rose at the weakest pace since February 2015. The companies having higher staff wages registered a rise in cost burdens. Meanwhile, charges rose slightly and at a slower rate than average.