Markit has new reports out today on service activity in China and Japan.
The former shows a bit of growth, the latter contraction. Because the reports are diffusion indices that give no weighting to the size of the companies reporting, one must look at these reports with a broad brush.
Japan Business Activity Contracts
The Markit Japan Services PMI shows service sector business activity contracts in February.
Key points
- Service sector activity falls, while new business remains just inside growth territory
- Input price inflation eased at Japanese services firms
- Business sentiment strengthens
Japan Composite PMI
Summary
Latest data highlighted a general weakening of business conditions in the Japanese service sector. Activity contracted, while new orders growth slowed to a marginal pace. Subsequently, service sector providers reduced workforce numbers for the first time in eight months. Meanwhile, inflationary pressures eased, as input prices rose at a slower rate. The headline seasonally adjusted Business Activity Index posted at 48.5 in February, down from 51.3 in January, thereby signalling worsening business conditions at Japanese services providers. Although only moderate, the rate of contraction was quicker than the average since the increase in the sales tax was implemented in April 2014.
Reports of weaker demand conditions and a decline in activitiy subsequently led service sector providers to cut their staff numbers for the first time since June 2014 in February. Although only fractional, the decline in employment levels was quicker than the long-run series average. Meanwhile, manufacturers continued to hire staff, although at a fractional pace. Inflationary cost pressures eased at Japanese services companies in February, as input price inflation slowed to the weakest rate in 28 months.
The negative side of the depreciation of the yen was still felt at Japanese manufacturers, as purchasing costs rose sharply due to a steep hike in raw material prices. Output charges, on the other hand, declined for the first time since August 2014, but at only a slight pace.
