TOKYO, Dec 15 Reuters Japan39;s factory activity shrank for a seventh straight month in December while the service sector made modest gains, a business survey showed on Friday, as weak demand and price pressures capped growth.

The au Jibun Bank flash Japan manufacturing purchasing managers39; index PMI shrank to 47.7 in December from 48.3 in November.

It was the fastest deterioration in 10 months in the index, which has remained below the 50.0 threshold that separates contraction for seven straight months.

The overall performance of the private sector remained subdued, said Annabel Fiddes, Economics Associate Director at SP Global Market Intelligence, which compiled the survey.

The survey showed a sharp decline in new work in the manufacturing sector, which led to a reduction in factory output, while employment in the sector was unchanged.

Input costs rose at the fastest pace in three months as a weaker yen, higher labour and raw material costs boosted expenses, while output charges eased to the weakest since July 2021.

Business confidence meanwhile softened when assessing the outlook for output, driven by less upbeat forecasts in the service sector, she said.

The au Jibun Bank flash services PMI expanded to 52.0 in December from 50.8 in November, the fastest gain in the three months. But the pace of the growth remained subdued compared to earlier this year.

Optimism for the year ahead in the sector weakened in December, with expectations for business activity…