Activity in the Japanese service sector grew at a slower rate in February as the rise in new business inflows weakened, data from IHS Markit and Nikkei showed.
The seasonally adjusted Markit/Nikkei Business Activity Index edged down to 51.7 in February from 51.9 in January, indicating a "moderate and slower" pace of output growth in the service sector. A reading above the 50-point mark indicates expansion.
New order receipts increased for the 19th straight month in February, but at a slower pace.
Service firms accumulated backlogs of work for the second month in a row, prompting them to hire more staff. The rate of job creation, however, fell to a three-month low, the report said. Service providers faced higher cost burdens in February, with survey data suggesting that the rise in costs eased was "strong overall." Higher operating expenses were attributed to greater food, fuel and labor costs, the report said.
In turn, businesses increased their output prices for the seventh straight month. However, the extent of the rise was "modest," suggesting a squeeze on profit margins.
Service firms maintained an "upbeat" outlook regarding future business activity, but the degree of optimism eased to the weakest level since September and October 2017, the report said.
Meanwhile, the Nikkei Composite Output Index, which covers both services and manufacturing, fell to 52.2 in February from 52.8 in January.
In a separate report released March 1, Japan's manufacturing Purchasing Managers' Index also slowed on the back of weaker rate of output growth.
