|Composite - Level||51.5||51.6|
|Services - Level||51.8||51.5|
Business conditions in the service sector improved in June. Activity increased at the fastest rate since September last year, alongside a sharper rise in new orders. Subsequently, prospects towards activity over the coming year strengthened. Employment levels, on the other hand, declined for the first time in three months, albeit fractionally. Meanwhile, cost burdens were evident, as input costs increased and at the fastest rate this year so far.
The June reading was 51.8, up from 51.5 in May, for the business activity Index signaling further positive improvements in business conditions at Japanese services companies. Business activity has increased in every month during the second quarter of the year. Furthermore, the latest reading was the highest since September last year.
Meanwhile, the rate of improvement in operating conditions at Japanese goods producers weakened in June. That said, the composite output index indicated a sustained expansion in overall activity by posting at 51.5 in June, which was in line with the average over the past two years. New business at service sector providers rose for the third consecutive month in June. Moreover, the rate of growth reached a seven-month high and was solid overall. Panelists mentioned a rise in international clients and an improvement in the domestic economy leading to an increase in new work intakes. In contrast, manufacturers reported a contraction in new orders.
Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the 'Report' shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the 'diffusion' index. This index is the sum of the positive responses plus a half of those responding 'the same'.
Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.
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