Economic Buzz: Japan Service Sector PMI Indicates Moderate Expansion In Business Activity In December

6 Jan 2022 , 10:15 AM

The Japanese service sector witnessed a softer expansion at the end of 2021. Both the activity and new orders indices signalled softer, yet still moderate rates of growth in December, as businesses continued to report a steady recovery in demand. The seasonally adjusted Japan Services Business Activity Index dipped from 53.0 in November to 52.1 in December to indicate a moderate expansion in business activity. Despite the slight easing in the growth rate, the average reading over the final quarter was the strongest quarterly performance since the third quarter of 2019.

The headline figure is the Services Business Activity Index, which tracks changes in the volume of business activity compared with one month previously. A reading above 50 indicates an overall increase compared to the previous month, and below 50 an overall decrease. Despite firmer demand conditions, firms struggled to fill available vacancies, which contributed to a further slight reduction in employment. Moreover, concerns about the potential for new variants of COVID-19 clouded the 2022 outlook for business activity, with the degree of optimism softening to the lowest for three months.

The au Jibun Bank Japan Composite PMI Output Index – which measures combined output in the manufacturing and services sectors – dipped from 53.3 in November to 52.5 in December to signal a softer, yet still moderate expansion in Japanese private sector output. As a result, the average reading in the final quarter marked the strongest quarterly performance since the fourth quarter of 2018. Both manufacturing and services firms reported a softening in growth rates in December.

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