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Washington Bureau Chief Denny Gulino had the same title at Market News for 18 years.
Similar experience undergirds our service in Ottawa, London, Brussels and in Asia.
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–ISM’s Miller: Employment Up on Strong Customer Demand; Some Firms Hiring AI Workers, Others Use AI Tools to Replace Staff
By Max Sato
(MaceNews) – U.S. services sector business expansion slowed slightly in September after a seasonal boost in August, hit by stiff U.S. import duties and rising fuel and transportation costs amid the lingering Mideast conflict, but the sector managed to stay in growth territory for the 27th straight month thanks to historically high new orders.
At the same time, data released Monday also showed backlog orders remained high as many firms are scrambling to diversify supply sources to alleviate slow deliveries and low availabilities of some goods to meet strong customer demand.
The purchasing managers index for services compiled by the Institute for Supply Management, which indicates direction of activity, posted its first drop in three months, down 0.5 percentage point at 54.9, after rising 1.3 points to a six-month high of 55.4 in August. It came in largely in line with the consensus forecast of 55.0. Thirteen industries indicated growth in September, up from 12 in August, while four reported contraction, down from five in the prior month.
The index is 0.8 point above its 12-month moving average of 54.1 in September and above the average for the 12th straight month. The 12-month moving average at 54.1 is the highest since 54.4 in April 2023, when the economy was recovering from the pandemic.
“Tariffs and fuel cost impacts were the most cited issues impacting respondents’ supply chains; in fact, fuel costs were mentioned twice as often as any other single issue impacting performance,” ISM Services Business Survey Committee Chair Steve Miller said in a statement. “Supply chain constraints were also a top concern of respondents and were impacting both lead times and costs.”
Supplier deliveries have been slow for nearly two years and prices that service providers pay remain at the highest in four years.
“Weekly price increases are the norm these days on commodities products (copper, aluminum and polyvinyl chloride),” a wholesaler told the ISM. “We are constantly reaching out to any and all suppliers we conduct business with to secure product to meet customer demand.”
A utility service provider also noted that business activity remains strong but supply chain conditions continue to be challenging. “Utilities and materials are experiencing slower availability, with steel particularly difficult to source domestically,” the firm said. “We are increasingly having to place orders internationally to secure required materials.”
The employment index’s first reading above the neutral line of 50 in three months seems to have resulted from increasing backlogs as well as high levels of business activity and new orders, Miller said. Last month he predicted that strong showings in business activity and new orders in the August report could signal a shift to increased employment in the services sector.
On the impact of the use of artificial intelligence, Miller told reporters that employment was down at some firms where they could not find qualified AI specialists while other firms adopted AI tools to replace workers including those tasked with basic computer programming. The later cases are still a relatively small portion, he said.
“For the first time, we’ve seen specific comments about reducing positions or reduced total employment as a result of the AI roles,” he said.
Asked whether the recent move among major central banks to raise interests to fight inflation will hurt the U.S. services sector as a whole because of higher borrowing costs for households and businesses, Miller repeated his earlier comments that the ISM’s twice-annual survey released in June indicated higher capital investment in the second half of 2026 due to higher interest rates.
“I think the increase in interest rate will definitely have an impact on at least the growth rate for services industries and a direct impact for particularly residential housing and the construction industry,” Miller said, adding that construction showed contraction for the second straight month in an otherwise busy season.
A construction firm told the ISM survey: “Interest rates continue to drive buyers out of the market. Half of buyers walking through the door cannot qualify to purchase.”
On the other hand, he said, the finance and insurance industry has been in growth territory since October 2025 except for August 2026, indicating higher interest rates (higher profit margins for lenders) and rising costs are not generating headwinds for the financial service providers.
All of the four sub-indexes that directly factor into the services PMI were in expansion territory (prior figures in parentheses).
Business activity/production 56.5 (61.7) -5.2; The index marked its first decline in three months after the August figure hit the highest since 62.7 in November 2022. The index has been fluctuating widely. It rose 2.5 points to 59.9 in February to hit the highest since 59.9 in May 2024 before slumping 6.0 points in March to 53.9, the lowest since 49.9 in September 2025.
New orders 59.8 (60.9) -1.1; The index flowed a 3.7-poing gain in August when it reached the highest since 61.6 in February 2023. Earlier, the index rose 2.0 points to 60.6 in March 2026 to hit the highest since 61.6 in February 2023 before slipping 7.1 points to 53.5 in April.
Employment 50.1 (47.8) +2.3; Back in growth after two months of contraction. The index has been above the neutral level of 50 for the fifth time in the last 12 months. Earlier, it slumped 6.6 points to 45.2 in March, falling to the lowest since 43.7 in December 2023 only a month after it rose 1.5 points to 51.8 to reach the highest since 53.9 in February 2025.
Supplier deliveries 53.2 (51.3) +1.9; The index indicated slower performance for the 22nd month in a row (above 50 means slower deliveries). The August reading of 51.3 was the lowest since 50.8 in October 2025.
Among other sub-indexes:
Prices 74.0 (72.6) +1.4; Above 60 for 22 months in a row and above 70 for the sixth time in seven months. The latest level of 74.0 is highest since 74.5 in July 2022. Earlier, the index fell 3.6 points to 63.0 in February, the lowest since 60.9 in March 2025.
Backlog orders 56.6 (55.6) +1.0;The highest since 58.3 in July 2022. The index has been in expansion territory for eight straight months, its longest continuous growth since a string of 26 months that ended in February 2023.
Inventories 57.8 (56.7) +1.1; The index showed expansion (above 50) for the eighth straight month. It follows a 5.3-poing rise to 56.7 in August. The index slumped 9.1 points in January to 45.1, the lowest since 45.1 in December 2022. It rose 9.4 points to 62.5 in May, matching the record high of 62.5 hit in May 2010.
Consensus outlook for Mace News
Friday, Oct 9, 2026
0830 JST (2350 GMT/1930 EDT Thursday, Oct 8) The Ministry of Internal Affairs and Communications releases the August average household spending.
Mace News median forecasts: -4.2% y/y (range: -4.4% to -2.4%) vs. July -3.6%; -0.3% m/m (range: -0.4% to +1.4%) vs. July +0.5%
By Chikafumi Hodo
TOKYO (MaceNews) – Japanese households are becoming increasingly cautious about spending as upward pressure on prices shows few signs of easing. Real spending by households of two or more persons is expected to drop for the ninth straight month on the year in August, while cooler temperatures may have limited purchases of summer-related items.
Several indicators pointed to a slowdown in consumer spending in August. New passenger car registrations slowed, while nationwide supermarket sales rose only slightly. Meanwhile, sales growth at nationwide department stores and convenience stores also slowed, underscoring that rising prices may be making households more cautious about spending.
In addition, natural disasters, including a powerful magnitude 7.1 earthquake that struck Kumamoto on Japan’s southern main island of Kyushu in late July and heavy rain and flooding in Chiba in mid-August, as well as lower temperatures in central and northern regions, including Tokyo, could have affected sales of summer-related items.
August real household spending by two or more persons is forecast to drop 4.2% on the year after falling 3.6% a month earlier. On the month, spending is expected to fall 0.3% for the first time in two months after rising 0.5% in July.
In July, consumers were wary of spending beyond daily necessities, while automobile purchases took a breather after a recent pickup. On the upside, the heat wave boosted demand for air conditioners, while replacement demand for washing machines also increased. People also spent more on hotels and dining out, although the increases may have been partly driven by higher fuel, labor and import costs.
–Bank of Japan Branch Managers Expected to Continue Reporting Modest Recovery in Regional Economies, Firms Plan to Reflect Rising Costs in Sales Prices Further
By Max Sato
(MaceNews) – In the past few weeks, two things have become clearer on the Japanese economic policy front. Central bank policymakers have shifted their gears toward neutral with a hawkish eye on above-target inflation after multiple normalization rate hikes while government leaders have stressed that the economy does not need to be reflated any longer.
After the latest policy meeting on Sept. 17-18, Bank of Japan Governor Kazuo Ueda told a news conference that “the phase of our policymaking has shifted,” citing the risk of inflation deviating upward from the bank’s 2% price stability target. This means future rate hikes will be aimed at cooling off inflationary pressures as opposed to the gradual process of lifting the short-term interest rate from around zero that began in March 2024.
Finance Minister Satsuki Katayama on Tuesday told reporters that she and her U.S. counterpart Scott Bessent confirmed in a Sept. 25 telephone call that Japan’s stance is that “an undervalued yen is problematic in general.” Katayama said she told Bessent that “Prime Minister (Sanae) Takaichi is not a proponent of reflationary policy.” The notion that government officials want the BOJ to be cautious about raising rates has led to a weaker yen and higher long-term bond yields. Tokyo wishes to turn around the stubbornly weak value of the yen, which is keeping imports expensive, and Washington does not want to see any spillover effects of a jump in borrowing costs into the Treasury market.
Katayama also told the Nikkei business daily in an interview published on Friday that the government now has “one voice” on economic policy, seeking to reassure that cabinet ministers are united. She also said the prime minister “respects central bank independence.” Takaichi has been portrayed by news media, based on her past remarks, that she is not a big fan of interest rate hikes in general.
Under Takaichi, the government has appointed two economic professors who are known to have a reflationary bias to the nine-member BOJ board. Those two members voted against raising the policy rate last month.
Economic and Fiscal Policy Minister Minoru Kiuchi on Friday told a news conference that the Takaichi government’s plans to boost economic growth through “proactive but responsible” fiscal spending is different from the “narrowly defined” reflationary policy under the late Prime Minister Shinzo Abe, who called for aggressive monetary easing, increased fiscal spending and structural reform to help correct an excessively strong yen and turn the deflationary mindset around.
Kiuchi is trying to fine-tune his remarks after market participants interpreted what he said at the latest BOJ policy meeting as urging the bank to be cautious about raising rates further. Both the Ministry of Finance and the Cabinet Office send senior officials to the bank’s policy-setting meetings as observers.
The summary of opinions from the Sept. 17-18 meeting released on Thursday quoted a representative of the Cabinet Office as saying, “The government expects the bank to fulfill its accountability regarding the decisions at this MPM (monetary policy meeting) and to examine carefully the cumulative effects of past policy interest rate hikes. Looking ahead, it may be necessary for the bank to take into consideration its estimates of the neutral interest rate.”
In the coming week, the focus is on how BOJ branch managers will describe the economic and financial conditions in their regions. They are expected to repeat that regional economies are on a gradual recovery trend but that they also face the headwind from rising energy, transportation and labor costs, which has prompted many firms to continue raising sales prices.
This follows last week’s release of the BOJ quarterly Tankan business survey that showed sentiment among large manufacturers rose to a nearly nine-year high in the September quarter after posting an unexpected pickup in June thanks to strong global demand for memory chips and equipment to produce them used in artificial intelligence projects.
Among other data, household spending is expected to post a deeper drop in August as consumers remain cautious amid rising costs of living and stormy weather wreaked havoc in some regions that month.
BOJ board members will digest these and other data before discussing their policy stance at their next meeting on Oct. 29-30. Judging from Governo Ueda’s comments last month, the BOJ does not need to conduct a back-to-back interest rate hike.
Monday, Oct. 5
1400 JST (0500 GMT/0100 EDT Monday, Oct. 5) The Cabinet Office releases September consumer confidence survey conducted around the middle of the month.
The August survey released on Sept. 1 indicated that sentiment among households with two or more people continued to show signs of a pickup. The seasonally adjusted index edged up 0.6 point to a six-month high of 35.5 in August from 34.9 in July. Of the four subindexes comprising the main index, those on economic wellbeing and willingness to buy durable goods rose for the fourth straight month while those on incomes and employment declined.
Tuesday, Oct. 6
1535 JST (0435 GMT/0235 EDT Tuesday, Oct. 6) Bank of Japan Governor Kazuo Ueda delivers a brief speech at a meeting of the Japan Securities Dealers Association. The governor is expected to discuss the current economic and financial conditions as well as the bank’s decision to raise the target for the overnight interest rate to 1.25% from 1% in a 7 to 2 vote at its Sept. 17-18 meeting.
Wednesday, Oct. 7
0830 JST (2330 GMT/1930 EDT Tuesday, Oct. 6) The Ministry of Health, Labour and Welfare releases preliminary August wages.
In revised July data, total monthly average cash earnings per regular employee in Japan rose 4.3% on the year, accelerating further from 4.0% in June and 3.3% in May and hitting their highest pace of increase since 4.4% in December 2024. The key wage indicator has risen for more than five years, indicating that firms are raising wages to secure qualified workers amid widespread labor shortages.
Base wages rose a solid 3.8% in July after a 3.5% gain in June. The increase in one-time pay including bonuses accelerated to 5.3% from 4.7% and overtime pay was up 4.5% vs. 3.4% the prior month. Real average wages posted their seventh straight gain but the pace of increase is slower than in nominal terms at 2.0% following a 2.2% gain previously.
Wednesday, Oct. 7
1400 JST (0500 GMT/0100 EDT Wednesday, Oct. 7) The Bank of Japan releases the August consumption activity index.
The supply-side indicator, which has a close correlation with revised GDP data, edged up a real 0.2% on the month in July on a travel balance adjusted basis after falling 1.5% in June and rising 1.1% in May. The index dipped 0.4% on the on the April-June quarter, when it gained 1.0%.
Thursday, Oct. 8
– Bank of Japan branch managers gather at the Tokyo head office for a quarterly meeting to discuss regional economic conditions.
Thursday, Oct. 8
1400 JST (0500 GMT/0100 EDT Thursday, Oct. 8) The Bank of Japan releases the quarterly report on regional economies.
In the last regional economic report issued in July, all nine regions described their economies as either recovering moderately, picking up or picking up moderately while five regions continued to note that there were some soft spots.
Many branch managers reported that firms continued to reflect rising labor and logistics costs in their selling prices. They also said higher energy and raw material prices, driven by the Mideast conflict, are leading to price pass-throughs in business-to-business transactions in the materials sector at a faster pace than before. Many also reported that firms dealing in food and other necessities planned to raise prices in the summer (July-September) and beyond. Some reported that smaller firms were unable to fully pass higher costs onto consumers, which was squeezing their profit margins.
Thursday, Oct. 8
1400 JST (0500 GMT/0100 EDT Thursday, Oct. 8) The Cabinet Office releases the September Economy Watchers’ Survey conducted between Sept. 25 and Sept. 30.
The August survey released on Sept. 8 showed that the current sentiment index improved for the fourth straight month in August, backed by higher spending on leisure and growing job offers. It rose 0.7 point on the month to a six-month high of 46.4 but it was still below the neutral line of 50, hit by heat waves and rain storms in many regions and a powerful earthquake that caused casualties and damage in the southwest prefecture of Kumamoto.
The Watchers’ outlook index, which shows sentiment in two to three months, marked its fifth straight increase, up 2.5 points at a six-month high of 48.3 in August. The Silver Week holidays from Sept. 19 to Sept. 23 raised hopes for higher consumer spending among the operators of hotels, restaurants, theme parks and others in the tourism and leisure industries but rain storms battered some regions during the holidays.
The index started the year at 50.1 before slipping to 50.0 in February and plunging to 38.7 as the Iran war triggered a spike in energy prices.
Friday, Oct. 9
0830 JST (2330 GMT/1930 EDT Thursday, Oct. 8) The Ministry of Internal Affairs and Communications releases August household spending.
Mace News median forecasts: -4.2% y/y (range: -4.4% to -2.4%) vs. July -3.6%; -0.3% m/m (range: -0.4% to +1.4%) vs. July +0.5%
Japan’s real average household spending is expected to post its ninth straight year-on-year drop in August, down a sharp 4.2%, after falling 3.6% in July, as consumers remain cautious amid rising costs of living and stormy weather wreaked havoc in some regions. Cooler weather dampened sales of summer clothing, air conditioners and other seasonal goods.
More markups in groceries and other necessities are expected in coming months as the Iran war has boosted energy costs and the weak yen has pushed up import prices. Firms are also reflecting higher labor costs in retail prices. Consumers are also being hit by sharp price hikes for computers and smartphones amid global shortages of memory chips.
On the month, real average expenditures by households with two or more people are forecast to slip back 0.3% after rising 0.5% in July and plunging 6.4% in June. The seasonally adjusted expenditures index rose 3.5% in May to a 12-month high of 102.4.
By Chikafumi Hodo TOKYO (MaceNews) – The Bank of Japan’s September Tankan business sentiment survey among large manufacturers is expected to climb to the highest
By Steven K. Beckner (MaceNews) – The mood of business economists has shifted dramatically, swinging from hope for monetary easing to expectations of more monetary
–BOJ Tankan Survey to Show AI Boom Lifting Manufacturer Sentiment, High Costs Making Services Sector Slightly Less Confident By Max Sato (MaceNews) – Behind the
– Goolsbee: Getting Inflation Down to 2% Target ‘Won’t Be Painless’ – Barkin: Inflation ‘Troublemaker’ Will Need More Than One ‘Talking-To’ – Paulson: ‘Recalibration’ Brought
–Data Calendar Thin Until Sept. 28 Week When BOJ’s Tankan Survey Set to Show Manufacturer Sentiment Improved Sharply in Q3 on Global AI Boom By
By Max Sato –BOJ Points to Upside Risks to its Inflation Outlook, Notes Financial Conditions Expected to Remain Supportive to Economic Activity (MaceNews) – The
– Warsh: Strong Economy, High Inflation Made FOMC ‘Remove Dose of Accommodation’ – Warsh: Rate Hike Should Ensure ‘Timelier Return’ to Fed’s 2% Inflation Target
WASHINGTON (MaceNews) – The following is the extremely brief policy statement by the Federal Open Market Committee Wednesday afternoon: The Federal Open Market Committee approved
Contact Mace News President
Tony Mace tony@macenews.com
to find a customer- and markets-oriented brand of news coverage with a level of individualized service unique to the industry. A market participant told us he believes he has his own White House correspondent as Mace News provides breaking news and/or audio feeds, stories, savvy analysis, photos and headlines delivered how you want them. And more. And this is important because you won’t get it anywhere else. That’s MICRONEWS. We know how important to you are the short advisories on what’s coming up, whether briefings, statements, unexpected changes in schedules and calendars and anything else that piques our interest.
No matter the area being covered, the reporter is always only a telephone call or message away. We check with you frequently to see how we can improve. Have a question, need to be briefed via video or audio-only on a topic’s state of play, keep us on speed dial. See the list of interest areas we cover elsewhere
on this site.
—
You can have two weeks reduced price no-obligation trial for $199. No self-renewing contracts. Suspend, renew coverage at any time. Stay with a topic like trade while its hot and suspend coverage or switch coverage areas when it’s not. We serve customers one by one 24/7.
—
Tony Mace was the top editorial executive for Market News International for two decades.
Washington Bureau Chief Denny Gulino had the same title at Market News for 18 years.
Similar experience undergirds our service in Ottawa, London, Brussels and in Asia.
