Japan’s au Jibun Bank Services PMI for September 2024 was revised down to 53.1 from the flash estimate of 53.9, marking the lowest reading in three months. Despite this decline, the service sector has continued its growth for the third consecutive month, though challenges are emerging.

While the services sector remains in expansion territory with a PMI above 50, new order growth has slowed for the second consecutive month. This indicates that demand is tapering off, which could signal a shift in momentum for the sector in the near future.

Export Orders Show Marginal Growth

Despite the overall slowdown in new orders, export orders saw a slight rise. This marginal growth suggests that international demand is still providing some support to Japan’s service sector, even as domestic demand cools.

Employment Rises for the 12th Straight Month

Employment in the services sector increased for the 12th consecutive month, driven by sustained workloads and positive growth expectations. This continued job creation reflects the sector’s efforts to manage ongoing business activity and prepare for future demand, despite uncertainties.

Input Costs and Price Inflation

Input costs, primarily driven by higher wages and food prices, rose at a slower pace in September. However, price charge inflation edged up slightly, indicating that businesses are passing some of the rising costs onto consumers.

Business Sentiment Hits a 20-Month Low

One of the most concerning aspects of the report is the decline in business sentiment, which reached a 20-month low. This dip reflects growing uncertainties about the future, as companies grapple with both internal cost pressures and external economic factors.

Conclusion

Japan’s services sector continues to expand, but at a slower pace. New order growth is weakening, and business sentiment is at its lowest in nearly two years, reflecting uncertainties about the future. However, steady employment growth and marginal increases in export orders offer some positive signs amidst these challenges.