Japan's private-sector services experienced remarkable growth in February, supported by robust sales and exports. The service-sector purchasing managers index (PMI) recorded a notable 53.7 in February, an increase from 53.0 in January. This reading reflects continued expansion well above the crucial 50-mark that differentiates growth from contraction. The service-sector growth observed in February marked the fourth consecutive month of increases, primarily driven by rising sales.
Sector-wise analysis reveals growth across four of the five monitored sectors, with finance and insurance leading the way. Moreover, inflation within the services sector showed signs of moderation in February. Input cost inflation eased slightly compared to the previous month, contributing to the slowest increase in service charges in four months. In response to the mounting demand, buoyed by stronger export sales, managers in Japan’s service sector have actively increased their workforce.
February saw companies adding to their payrolls for the 17th consecutive month, although the rate of job creation experienced a slight slowdown. Confidence among service providers remained resilient in February. Businesses maintained a positive outlook regarding their activity over the upcoming year, anticipating that expansion plans will further stimulate new sales and overall growth. The Japan Services PMI, which aggregates data from surveys conducted among 400 service sector companies, was compiled by a reputable financial intelligence provider between February 10 and February 25.
Additionally, the composite PMI for Japan, which encompasses both manufacturing and services, reported a figure of 52.0 in February, up from 51.1 in January. This increase indicates a stronger overall rise in private sector activity within Japan. Notably, the observed expansion rate is the most significant since September 2024, attributing this growth to heightened services activity alongside a milder contraction in manufacturing output.
This data paints a promising picture for the Japanese economy moving into 2024..