TOKYO (Reuters) – Activity in Japan’s services sector expanded at a slightly slower pace in April than the previous month as growth in new business slowed, a business survey showed on Wednesday.
The Markit/Nikkei Japan Services Purchasing Managers’ Index (PMI) edged lower to a seasonally adjusted 51.8 in April from 52.0 in March.
The index stayed above the 50 threshold that separates contraction from expansion for the 31th straight month.
“Domestic demand is holding up, currently supporting activity and keeping the year-ahead outlook well anchored,” said Joe Hayes, economist at IHS Markit, which compiles the survey.
“Nevertheless, manufacturing woes continued, which have kept the composite PMI at a subdued level which is indicative of quarterly GDP growth of about 0.2 percent.”
The subindex measuring new business decreased to 52.8 from 53.8 in March. New export business also swung to contraction for the first time in three months.
The composite PMI, which includes both manufacturing and services, nudged higher to 50.8 from 50.4 in the previous month, because manufacturing activity expanded in April for the first time in three months as companies hired more workers and grew more optimistic about the business outlook.
The United States and China appear to be making progress in hammering out a deal to end the months-long trade dispute, but analysts caution it is unlikely to end Washington’s more protectionist stance.
Japan is exposed to the dispute as it ships big volumes of electronics items and heavy machinery to China which are used to make finished goods destined for the United States.
Washington is also pressing Tokyo for a new trade deal to reduce its large trade deficit with Japan, and in particular is urging Japanese automakers to build more vehicles in the United States.
(Reporting by Stanley White; Editing by Kim Coghill)