TOKYO, May 21 (Reuters) - Japan's manufacturing activity slowed slightly in May, while service sector growth ground to a halt for the first time in over a year, as surging costs linked to the Middle East conflict weighed on confidence, a business survey showed on Thursday.
• The S&P Global flash Japan Manufacturing Purchasing Managers' Index (PMI) fell to 54.5 in May, from 55.1 in April. A reading above 50.0 indicates expansion, while below that level signals contraction.
• A key sub-index for factory
output expanded for the fifth straight month but the pace of growth eased from April. The sustained rise in production was partly attributed to stockpiling efforts as the Middle East war continued to disrupt supply chains and drive up prices.
• The service sector stagnated, with the flash Japan services PMI index falling to 50.0 in May from 51.0 in April, ending 13 months of growth.
• Cost pressures intensified sharply across the private sector. Input prices rose at the fastest pace since October 2022 due to supply disruption and raw material shortages stemming from the Middle East conflict. Manufacturers experienced a sharper rise in costs compared with the services sector.
• In response to surging expenses, Japanese companies raised their selling prices at the sharpest rate on record in nearly 19 years of data collection, though the pace of increase remained slower than input cost inflation.
• Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said: "If cost pressures continue to mount and demand softens, business confidence and the broader economy could come under greater strain in the months ahead."
• Business confidence for the year ahead edged up to a three-month high but remained historically subdued, with firms expressing ongoing concerns over the war's impact on supply chains and inflation.
• The flash Japan composite PMI, which combines manufacturing and services activities, fell to 51.1 in May from 52.2 in April, marking the softest pace of expansion in five months.
(Reporting by Kaori Kaneko; Editing by Sam Holmes)
