Japan's service sector continued to improve in August as the Nikkei Japan Services Purchasing Managers Index, or PMI, edged up to a seasonally adjusted 51.5 from 51.3 in July, data from IHS Markit and Nikkei showed Sept. 5.
The Nikkei Composite Output Index rose to 52.0 in August from 51.8 in July, reflecting a broad-based rise in the private sector economy.
"The headline PMI figure pointed to the fastest growth in Japanese service sector output for four months," said Joe Hayes, economist at IHS Markit.
A rise in sales volumes was accompanied by companies hiring extra staff at the fastest pace in 14 months to meet strong demand. Higher payroll numbers led to a further rise in operating costs in the service sector, while increased labor and material costs underpinned a sharp rise in input price inflation.
New orders rose at the joint-fastest rate in nine months coming on the back of successful project bids and new store openings.
Faster growth of new business limited the ability of the service sector to complete orders on time, which led to a third successive monthly rise in work backlog. However, the rate of accumulation was softer than those seen in the previous two months.
Business confidence remained strong and upbeat although sentiment faltered in the manufacturing sector as the degree of confidence eased to its weakest level in 21 months due to geopolitical risks.