Japan’s service activity maintains firm pace as demand picks up – PMI

TOKYO (Reuters) – Japan’s service activity maintained a brisk pace of growth in June as the relaxation of pandemic-related restrictions revived consumer demand, a private-sector survey showed on Wednesday.

The final au Jibun Bank Japan Services purchasing managers’ index (PMI) fell to a seasonally adjusted 54.0 last month from a record-high 55.9 in May.

That compared with the flash reading of 54.2 and remained well above the 50 threshold separating expansion from contraction for the 10th straight month.

“Japanese private sector firms remained strongly optimistic that activity would continue to expand over the coming year,” as the pandemic and the inflation pressures on the economy ease, said Usamah Bhatti, an economist at S&P Global Market Intelligence.

Business expectations for the coming year were also firm but slightly down from previous months, according to the survey.

The government has scrapped strict pandemic-related border controls and reclassified COVID-19 as the same level as the seasonal flu.

Service providers said price pressures were persistent in June although input inflation dropped to the lowest level since March last year.

A quarterly Bank of Japan “tankan” survey for June released on Monday showed non-manufacturers’ business sentiment hit the highest level since June 2019, while an index reflecting sentiment among hotels and restaurants hit a record high.

Mirroring the trend, the PMI survey showed a recovery in inbound tourism helped June’s new export business stay in expansion for the 14th month straight, even though the pace of increase was the slowest in three months.

The composite PMI, which combines the manufacturing and services activity figures, slowed last month after peaking in May. The index dropped to 52.1 in June from 54.3 in May, staying above the break-even 50 mark for the sixth straight month.

(Reporting by Satoshi Sugiyama; Editing by Sam Holmes)