TOKYO (Reuters) - Japan's service sector activity expanded at its quickest pace in three months in August, underpinned by robust consumer spending as inbound tourism regained momentum, a private-sector survey showed on Tuesday.
The relatively upbeat service sector conditions contrast with the manufacturing industry's shrinking activity and subdued business sentiment amid slowing global demand.
The final au Jibun Bank Japan Services purchasing managers' index (PMI) grew to 54.3 last month from 53.8 in July, in line with the flash reading and stayed above the 50-benchmark dividing expansion from contraction for 12 consecutive months.
"A stronger improvement in new orders received by Japanese service firms underpinned an acceleration in business activity growth," said Usamah Bhatti, an economist at S&P Global Market Intelligence.
"That said, service providers signalled a steeper increase in inflationary pressures during August," he said, underlining some of the challenges faced by the broad business sector across the country.
The subindex measuring outstanding businesses swung back above the 50.0 threshold in August helped by the re-acceleration of new orders.
Survey respondents noted stronger consumption thanks to higher customer numbers and demand on the back of a surge in inbound tourists. The number of visitors to Japan in July rose to its highest since the pandemic at 2.32 million people.
Employment also regained strength last month, as service providers were inclined to take on additional staff to meet booming demand and amid a rise in confidence.
Business expectations remained strong, fuelled by hopes of long-term business expansion following the winding down of COVID-19 restrictions.
On the flip side, input prices were high and rose at the fastest pace since February due to soaring raw material, fuel and electricity cost.
The composite PMI, which combines the manufacturing and service activity figures, rose to 52.6 in August from 52.2 in July, staying above the break-even 50 mark for eight consecutive month.