TOKYO, Aug 21 (Reuters) - Japan's manufacturing sector expanded in August as new orders rose at their fastest pace since January 2018, a business survey showed on Friday.
The S&P Global Flash Japan Manufacturing Purchasing Managers' Index (PMI) rose to 55.1 in August from 54.5 in July, a preliminary estimate by S&P Global showed. The 50-mark separates growth from contraction.
"While we saw growth momentum pick up across both manufacturing and service sectors, factories continued to lead growth, registering
sharp increases in both production and new orders," said Annabel Fiddes, economics associate director at S&P Global Market Intelligence.
Japan's economy slowed in the second quarter, gross domestic product data released on Monday showed, though investors brushed aside the soft reading as reflecting one-off factors.
Manufacturers also saw the steepest increase in total sales and overseas demand for more than 8-1/2 years, with firms citing strong demand from semiconductor and AI-related industries, Fiddes added.
Manufacturers led employment growth in August and expanded input buying, while stocks of purchases rose only slightly and suppliers' delivery times lengthened markedly.
Services activity also strengthened in August. The S&P Global Flash Japan Services PMI Business Activity Index rose to 52.3 from 51.2, helping lift the Composite Output Index to 53.4 from 52.7, its highest since February.
Cost pressures eased from June's near-record pace, with overall input inflation across the private sector slowing to a five-month low. Even so, selling prices for goods and services rose at one of the steepest rates on record.
Business confidence improved to its highest since February, with manufacturers more upbeat than services companies, attributing their optimism to expectations of higher sales, greater operational capacity and stronger overall market conditions.
"This adds to hopes that Japan's private sector remains well placed to perform strongly going forward, provided there are no further shocks to prices or demand," Fiddes said.
(Reporting by Satoshi Sugiyama; Editing by Jacqueline Wong)
