Economic Buzz: Japan?s services sector stagnates in May

Japan?s services economy stalled in May, with the S&P Global Japan Services PMI Business Activity Index slipping from 51.0 in April to 50.0, marking the end of a 13‑month expansion streak. Firms reported subdued demand, with sales rising only marginally?the slowest pace since the current growth cycle began nearly two years ago.

Cost pressures intensified sharply, with input prices climbing at the fastest rate in 43 months, driven by fuel, energy, raw materials, and labour costs. Output charges rose at the second‑fastest pace since the survey began in 2007. Employment growth slowed to its weakest in nine months, while outstanding business rose modestly.

Sub‑sector data showed Finance & Insurance recording the strongest growth, while Consumer Services contracted most sharply. Export demand fell at the steepest pace in over four years, weighing on overall new orders.

Business confidence improved slightly for the second month in a row but remained below the post‑pandemic average, with firms citing geopolitical uncertainty, rising costs, and demographic challenges.

At the composite level, the Japan Composite PMI Output Index eased to 51.1 from 52.2, signalling only modest growth?the weakest in five months. Manufacturing drove the upturn, as services activity stagnated.

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