|Composite - Level||51.2||52.9|
|Services - Level||51.4||53.7|
Both the September services and composite PMIs pointed to a slowdown business. The expansion of the Japanese service sector slowed alongside a further easing in the rate of expansion in new orders. In contrast, employment growth resumed, having declined slightly in the prior month. The seasonally adjusted business activity index posted a reading of 51.4, down from 53.7 in August indicating a slower expansion in the Japanese service sector. Meanwhile, output growth at Japanese manufacturers slowed to the weakest pace in the current five-month sequence of expansion. The weaker increases in both the manufacturing and service sector was reflected in the composite output index which posted the lowest reading since April (51.2), down from 52.9 in August.
On the price front, increased competition encouraged service sector firms to reduce selling prices. Input prices, on the other hand, continued to increase, although the rate of inflation was slight. Meanwhile, pressure on capacity was evident in the service sector as volumes of unfinished work accumulated further during the month.
Alongside activity and new order growth, service sector companies hired additional staff in September, offsetting the fall observed in August. Although modest, the rate of expansion was the quickest since November 2014. There was also mention of the opening of new businesses helping to boost staff numbers. Meanwhile, staffing levels at manufacturers decreased for the first time since March.
Forecasts towards activity in the service sector over the year remained robust, despite slowing from August's 23-month record. Expectations of an economic recovery, expansions in business and greater demand generated from the preparations related to the hosting of the Olympic Games were some of the main reasons behind the confidence.
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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