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Japan Service Sector Activity Declines At A Slower Rate In May

Japanese service sector activity declined at a slower rate in May, reflecting the recent hike in sales tax, a survey by Markit Economics showed Wednesday.

The services business activity index came in at 49.3 in May, falling below the no-change mark of 50, following an index of 46.4 in April. This marked the second consecutive month of decline although the recent decline was slower.

The composite output index, a weighted average of manufacturing output index and services business activity index, logged 49.2 in May. This signaled a slower contraction compared to the 46.3 figure recorded in April.

New business for the service sector decreased in May at a slower rate than in April as the index moved towards the no-change mark. Companies attributed the decrease to the recent hike in sales tax. However, employment rose for the fifth consecutive month in May.

Meanwhile, output prices rose for the fourth consecutive month in May and input costs continued to rise, continuing the growth pattern started in November 2012. This marked the longest periods of inflation for both the prices measures.

Volume of outstanding work rose for the third consecutive month in May, though at a marginally higher rate than in April.

The service sector activity is expected to be higher in the upcoming twelve months compared to the current situation as firms in the service sector expect an improvement in the Japanese economy and a return of consumer-driven demand.

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