Japan's service activity marks fastest growth in six months, PMI shows

TOKYO (Reuters) - Japan's service activity marked the fastest growth in six months in February, backed by strong sales and new export businesses, a private-sector 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 caused by weak global demand.

The au Jibun Bank Japan Services Business Activity Index rose to 53.7 in February from 53.0 in January, the survey compiled by S&P Global Market Intelligence showed.

It was better than a flash reading of 53.1 and stayed above the 50.0 threshold separating expansion from contraction for the fourth consecutive month.

"The performance of the Japanese service sector improved further in February," said Usamah Bhatti, economist at S&P Global Market Intelligence.

New businesses kept growing albeit at a slightly slower pace, the survey showed. New export business marked the strongest growth since last May lifted by high demand from Taiwan and Vietnam.

While businesses were confident that growth momentum would be sustained thanks to improving employment and backlogs, Bhatti said overall optimism weakened over labour shortages.

Input cost inflation eased from January but remained high due to increased labour, fuel and raw material costs, the survey showed. Inflation of charged prices also slowed to a four-month low.

The au Jibun Bank flash Japan composite PMI, which combines both manufacturing and service sector activity, expanded to 52.0 in February to 51.1 in January.

Overall confidence in the future performance of the private sector as a whole, though, rose at the slowest pace since January 2021 due to labour shortages and U.S. trade policy concerns, Bhatti at S&P Global Market Intelligence said.

(Reporting by Satoshi Sugiyama; Editing by Sam Holmes)