TOKYO (Reuters) – Japanese service sector activity expanded at its quickest pace in seven months in March, underpinned by strong demand particularly for inbound tourism, a business survey showed on Wednesday.
The service sector has been the driving force behind the country’s recent economic growth, helping offset the drag in manufacturing hampered by weak global demand.
The final au Jibun Bank Service purchasing managers’ index (PMI) rose to 54.1 in March from 52.9 in February, marking the 19th consecutive month of increase, according to index publisher S&P Global Market Intelligence.
It remained above the 50.0 threshold separating expansion from contraction on a monthly basis, but slightly below the flash reading of 54.9.
“Once again, growth was driven by the service sector, as manufacturers noted a softer yet still solid contraction in production,” said Usamah Bhatti, economist at S&P Global Market Intelligence.
Inbound tourism boosted service-sector confidence in new business to the strongest expansion since August last year, while solid demand and customer numbers propelled a rise in business activity in March, according to the survey.
New export business rose for three consecutive months thanks an increase in foreign tourists.
The level of outstanding business, a bellwether for upcoming work, in March dipped slightly from the previous month but the increase was still close to record rates. Business confidence in the next 12 months was also robust.
The Bank of Japan’s tankan survey released on Monday showed optimism in Japan’s service sector climbed to a 33-year high in the first quarter on booming tourism and rising profits from price hikes.
Meanwhile, input price inflation crept up at the fastest pace in five months in March due to rising labour, fuel and utilities cost. Firms, though, have continued to pass along cost increases.
The composite PMI, which combines the manufacturing and service activity figures, went up to 51.7 in March from 50.6 in February.
(Reporting by Satoshi Sugiyama. Editing by Sam Holmes.)
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