The data offer something for both sides of the BoJ debate: historically sharp cost pressures support further tightening, while slowing hiring and weaker confidence give the cautious camp ammunition. On balance, the release is unlikely to shift December pricing materially, leaving the yen more sensitive to the BoJ minutes and oil-driven inflation signals. Firms citing inflation as a drag on confidence underlines how energy costs from the Middle East are feeding into Japanese business sentiment. Weak export orders point to limited support from overseas demand.
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Earlier:
BoJ minutes: board backed further hikes, flagged 50% oil surge as government urged caution
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Japan’s service providers are still growing and still paying up, but they’re hiring less and feeling gloomier about it.
Summary:
The services PMI rose to 51.7 in October from 51.3, a fifth month of expansion, driven by domestic demand
The composite PMI slipped to 52.1 from 52.3, a five-month low, as manufacturing growth slowed
Services hiring rose at the slowest pace in 14 months; across the private sector, job creation hit a one-year low
Input cost inflation eased to an eight-month low but stayed well above its long-run average
Services confidence fell to its weakest since March, citing inflation, ageing and labour shortages
S&P Global said growth momentum and cost pressures will be key for BoJ tightening decisions
Japan’s services sector grew at a slightly faster pace in October, but a slowdown in manufacturing pulled overall private sector growth to a five-month low, while still-sharp cost pressures kept inflation in focus for the Bank of Japan, according to S&P Global’s latest survey.
The S&P Global Japan Services PMI rose to 51.7 in October from 51.3 in September, marking a fifth straight month of expansion. Firms said stronger inflows of new work and efforts to broaden their customer base lifted activity, though growth remained modest and below the average so far this year.
New orders also picked up slightly, driven by firmer domestic demand. Export business fell again, although the decline was the smallest in six months.
Hiring was the weak spot. Services employment rose only marginally, the slowest pace in the current 14-month run of job creation, as some firms reported staff leaving through resignations and retirements. With capacity stretched, backlogs of work increased again.
Price pressures slowed but stayed elevated. Input cost inflation fell to an eight-month low and output charges also rose more slowly, yet both remained well above their long-run averages. Business confidence about the year ahead dropped to its weakest since March, with firms citing inflation, an ageing population and labour shortages.
The broader picture was softer. The composite PMI, which combines services and manufacturing, slipped to 52.1 from 52.3, its lowest since May, though it still pointed to a 19th consecutive month of growth. Faster services growth was offset by a slower rise in factory output. Across the private sector, job creation slowed to a one-year low and confidence fell to a three-month low. Input costs rose at a historically sharp rate, while growth in prices charged eased to a four-month low.
S&P Global said input costs and selling prices, while rising more slowly, were still increasing at a pace that suggests official consumer inflation could stay elevated in the coming months. It added that whether growth loses further momentum and whether cost pressures ease will be key considerations for the BoJ as it weighs further tightening, warning that persistent inflation weighed on confidence and could also constrain demand and hiring.
The data arrive on the same day as minutes from the BoJ’s September meeting, which showed policymakers agreed on the need for further rate increases, keeping attention on whether the central bank moves again in December.
This article was written by Eamonn Sheridan at investinglive.com.
