Japan's services sector grew at a slower pace in September, as disruption caused by the Kumamoto Earthquake and weaker demand curbed the growth of new orders. S&P Global's PMI remained above 50 but fell from the previous month.
Japan's services PMI fell to 51.3 in September from 52.5 in August. The result was below market expectations and indicated that the pace of expansion had slowed as the third quarter drew to a close. New orders increased for the 27th consecutive month, but momentum weakened from the previous month. Disruption caused by the Kumamoto Earthquake and softer demand were cited as factors.
Employment increased for the 13th consecutive month, at a faster pace than before. The accumulation of outstanding orders reached its strongest level in seven months, prompting companies to expand capacity and fill vacancies. Meanwhile, the rate of increase in input costs fell to a six-month low, although costs for raw materials, oil, labor and food continued to rise.
The composite output index for manufacturing and services fell to 52.3 from 53.5 in August, indicating the slowest pace of expansion in four months. Inflationary pressures remained elevated, with some observers believing the data could influence the Bank of Japan's policy decisions, but the outlook for an economic recovery remained intact.
Looking ahead, expectations are rising for a recovery in customer demand, the launch of new products, business diversification and additional capital investment, although the impact of the earthquake remains a point of concern.