October 4, 2017 / 1:00 AM / a year ago

Japan September services PMI shows growth slowest in 11 months

TOKYO (Reuters) - Japan’s services sector expanded in September at the slowest rate in 11 months as the pace of new orders eased, though a raft of other data suggest the economic recovery remains intact even as momentum may have ebbed slightly in the third quarter.

A man cooks a skewered chicken meal at a Japanese casual style bar and restaurant called Izakaya in Tokyo, Japan July 26, 2017. REUTERS/Issei Kato

The Markit/Nikkei survey released on Wednesday showed its Japan Services Purchasing Managers Index (PMI) fell to a seasonally adjusted 51.0 from 51.6 in August.

The index remained above the 50 threshold that separates expansion from contraction for the 12th consecutive month but was at the lowest level since October 2016.

The new business index also showed expansion at a reduced pace, down at 52.0 in September from 52.4 in August.

In one positive sign, the index for business sentiment rose to 53.3 from 52.4 in the previous month, suggesting companies believe the lull in activity is temporary.

“Softer growth in new work squeezed activity to its slowest growth rate in nearly a year, while job creation remained modest,” said Joe Hayes, economist at IHS Markit, which compiles the survey.

“Weaker activity growth, however, has not fueled a further slide in business confidence, which picked up moderately following a 13-month low in August.”

The composite PMI, which includes both manufacturing and services, fell to 51.7 in September from 51.9 in the previous month.

Japan’s economy grew an annualized 2.5 percent in April-June, which was the fastest pace of growth in more than a year thanks to gains in consumer spending and housing investment.

Economists have said this pace is unsustainable and expect growth to slow slightly in July-September. However, many remain confident the economy will continue to motor at a healthy clip, driven by a boom in exports and rising domestic demand.

In fact, the manufacturing PMI released on Monday showed Japanese factory activity in September expanded at the fastest pace in four months, driven by growth in domestic and export orders.

A Bank of Japan survey also showed that big manufacturers have more confidence in business conditions than they have had for a decade.

Reporting by Stanley White; Editing by Shri Navaratnam

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