Japan services PMI crosses 50-point mark on rise in new orders

Japan’s services Purchasing Managers’ Index (PMI) crossed the 50-point mark during the month of July, a sign of optimism after the contraction witnessed last month as companies shrugged off business backlogs amid a steady revival in new orders, a private business survey showed Wednesday.

The IHS Market Japan Services Purchasing Managers Index (PMI) rose to 50.4 in July from 49.4 in June on a seasonally adjusted basis. The index rose above the 50-point that separates expansion from contraction for the first time in two months.

Moreover, the index for new business rose to 49.7 from 47.3 in the previous month, which was the lowest since September 2011. The composite Japan index for output in both manufacturing and services rose to 50.1 in July from 49.0 in June, showing the first expansion in five months.

However, employment in the services sector fell at a slightly faster pace in July as companies remained least sanguine over the business outlook in the industry over the next four years, owing to global headwinds and the steaming impact of Brexit and slowdown in the Chinese economy.

"Latest survey data pointed to a slight improvement in business activity at Japanese services firms," said Amy Brownbill, Economist, Markit.

In the meantime, the first few months of this year witnessed devastating earthquakes in Kumamoto that deeply hurt the company’s southern manufacturing hub, although barely impacting the service output of the economy.