TOKYO (Reuters) - Japan's factory activity growth slowed to a 19-month low in August as output and new order declines deepened, amid growing pressure from persistent rises in raw material and energy costs and weakening global demand.
Activity in the services sector contracted for the first time in five months, as a fall in new business raised worries about lacklustre demand at home.
The au Jibun Bank Flash Japan Manufacturing Purchasing Managers' Index (PMI) fell to a seasonally adjusted 51.0 in August from a 52.1 final in July, marking the slowest expansion since January last year. The 50-mark separates contraction from expansion.
The headline figure was pulled down in the second consecutive month of declines in output and overall new orders. New orders shrank at the fastest rate in nearly two years.
Optimism about conditions for the year ahead underpinned the slightly positive headline figure, the survey showed. Producers only became slightly less optimistic about conditions ahead compared to the previous month.
"August data signalled the second-weakest reading in the composite index so far this year, though the rate of deterioration was only mild," said Usamah Bhatti, economist at S&P Global (NYSE:SPGI) Market Intelligence, which compiles the survey.
"Of concern was the amount of new business received by private sector firms, which reduced for the first time in six months and pointed to further weaknesses to come."
The au Jibun Bank Flash Services PMI Index slipped to a seasonally adjusted 49.2 in August from July's final of 50.3, contracting for the first time since March.
The au Jibun Bank Flash Japan Composite PMI, which is calculated by using both manufacturing and services, saw a marked decline to 48.9 from July's 50.2 final.