Nikkei / Markit PMis for March, showing the slowest Services expansion for 17 months
Commenting - Joe Hayes, Economist at IHS Markit:
"The Japanese service sector lost further momentum during March, with overall business activity growing at the weakest pace since October 2016.
- New order receipts rose, albeit only slightly and at the softest rate in a year-and-a-half.
That said, despite PMI data signalling disappointing output and demand conditions, prospects appear upbeat.
- Incoming new business has grown for 20 successive survey periods, and firms expect this trend to continue, as indicated by a solid degree of optimism towards future activity.
This sustained upturn in demand led to capacity pressures however, with backlogs of work rising for a third month running.
- In turn, recruitment picked up, further suggesting confidence among firms that new sales will continue to be secured over the coming months.
Expansionary order book volumes also encouraged firms to hike their selling prices.
- That said, the rate of output price inflation was broadly unmoved from the slight pace seen during February.
- Anecdotal evidence suggested that rising cost burdens were a key factor behind this latest rise.
- However, recent yen strength provides a source of downward cost pressures, which could ultimately cause output price discounting."
