Earlier this week we had:
The preliminaries and priors for the December PMIs are here:
The bump higher in the services PMI from November was helped by Japan's reopening.
- Services 51.1 (prior was 50.3)
- Composite is 49.7 (prior was 48.9)
Comments in the report :
- As has been the case since the launch of the National Travel Discount Programme in October, an uplift in tourism volumes, alongside a sustained improvement in the COVID-19 situation continued to support demand conditions and reportedly led to sustained expansions in business activity and inflows of new business in December. With the government-led programme set to continue in January, we can hope to see activity levels across the Japanese service sector expand in the new year.
- Notably, despite current global conditions, demand from overseas increased at the fastest pace since July 2018.
- However, the bad news in December primarily resides with regards to cost pressures. Rates of both selling price and input cost inflation accelerated on the month with the former the fourth strongest ever recorded. Alongside increasing fuel, electricity and raw material costs, firms reportedly began to feel the effects of October’s upward minimum wage rate revision in December. As such, companies increased their charged prices at a sharper pace. Some panel members mentioned that the stronger demand conditions encouraged firms to rise prices further in an attempt to increase profitability.
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The Bank of Japan will welcome the inflation pressures noted in the report.
