Japan Service Sector Gains Strength In December

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Japan's service sector activity gained strength in December driven by uplift in tourism and strong improvement in Covid-19 conditions, survey results from S&P Global showed on Friday.

The au Jibun Bank services Purchasing Managers' Index rose to 51.1 in December from 50.3 in November.

A reading above 50.0 suggests expansion in the sector. The latest score was indicative of a fourth consecutive rise in activity.

The government's National Travel Discount Programme boosted the tourism sector. Order book volumes increased for the fourth straight month but the pace of increase was the slowest since July.

To meet the workload, firms raised their workforce numbers for the eleventh consecutive month. The rate of job creation was the sharpest since May. Backlogged work increased for the fifth month in a row, which was the longest sequence in over five years.

Firms were strongly optimistic about output over the coming 12 months as they expect demand conditions to remain positive.

Turning to prices, the survey showed that average cost burdens increased at an accelerated pace in December. Concurrently, firms lifted their selling prices the most in over three years and the fourth highest on record.

"With the government-led programme set to continue in January, we can hope to see activity levels across the Japanese service sector expand in the new year," Laura Denman, an economist at S&P Global Market Intelligence, said.

The overall private sector posted a contraction in December as manufacturers reported a sustained fall in output. Nonetheless, the composite output index advanced to 49.7 from 48.9 in November.

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