Japan’s Services Sector Fastest Growth Over Six Months in April

The services sector in Japan rose at the quickest rate in first half of the year due to more demand for new orders, based on the private poll on Wednesday. This implies that the economy kick starts the second quarter in a good light.

However, the business confidence seems to have slowed down as reflected from the survey since there has been a difficulty in hiring despite a shortage of workers.

Japan Services Purchasing Managers Index (PMI) climbed to 52.5 in April on a seasonally adjusted basis compared to 503.9 in March. The index is still above the 50 mark that separates the expansion from contraction for 1 year and 7 months as the highest in six months as recorded.

The output may have weakened in February to March but starting the second quarter, the momentum picked up, according to an economist at IHS Markit, Joe Hayes who compiles the survey. “Panelists noted that increased competition and rising labor shortages may impact output potential over the coming 12 months.”, he added.

Meanwhile, the growth of new businesses also picked up in March following the decline of future business expectations becoming the lowest record in seven months.

As for the manufacturing and service sectors, the composite PMI increased to 53.1 from 51.3 in March. At the same time, the Japanese manufacturing activity also rose at a faster rate in April, according to the survey on Tuesday. However, a stronger yen slowed down the growth of export orders despite more demand.

The forecast growth on the Reuters poll grew by 0.5 percent annually in the first quarter as the consumer spending and factory output weakened. Hence, this indicates a slowdown from 1.6 percent annualized growth in the fourth quarter.

Ultimately, the Asian economy grew for eight consecutive quarters in 2017, which has been the longest continuous growth since the bubble economy in the 1980s.

Yet, some economists are worried that there would still be sluggish due to higher inventories in the semiconductor and electronic parts sector.