Japan's private sector activity expanded at its fastest pace in three months in December, driven by growth in the services sector, as per data released based on a preliminary survey by au Jibun Bank and S&P Global on Monday. The Flash Composite Purchasing Managers' Index (PMI) rose to 50.8 in December from 50.1 in November, staying above the 50 mark that separates growth from contraction. The services sector showed the strongest gains, with the Flash Services Business Activity Index climbing to 51.4 in December from November's 50.5. Meanwhile, manufacturing output remained weak, as the Flash Manufacturing Output Index edged up to 49.4 from 49.2, marking its fourth consecutive month of contraction. Business activity in Japan's private sector expanded marginally but marked the strongest growth since September, said Usamah Bhatti, economist at S&P Global Market Intelligence. He added that stubborn inflation and a weaker yen continued to weigh on costs, leading to the steepest rise in selling prices since May. Services firms benefited from the strongest rise in new business inflows in four months, while manufacturers faced a sharper decline in new orders.

Input prices surged across both sectors, with services seeing the most significant rise in costs in eight months. Optimism remained above the long-term average, though it eased to its second-lowest level in over three years. Companies highlighted concerns about labor shortages and the inflationary impact on activity, as noted by Bhatti..