TOKYO, July 24 Reuters Japan39;s factory activity contracted slightly in July as output and new orders fell and firms remained under pressure from higher prices, a business survey showed on Wednesday.

But the expansion in the service sector helped overall activity in Japan39;s private sector return to growth in July, the survey found.

The au Jibun Bank flash Japan manufacturing purchasing managers39; index PMI slipped to 49.2 in July from 50.0 in June.

The index fell below the 50.0 threshold separating growth from contraction on a monthly basis for the first time in three months.

Service providers led the expansion and saw activity growth hit a threemonth high, while manufacturers saw a renewed reduction in output that was nonetheless only marginal, said Usamah Bhatti, economist at SP Global Market Intelligence, which compiled the survey.

The key subindex of output contracted slightly in July, reversing from its expansion in June and new orders also fell to the weakest level since February, the survey showed.

Manufacturers remained pressured as input cost inflation intensified to the highest level since April 2023, while output prices eased to a fourmonth low, it found.

Japan39;s wholesale inflation accelerated last month as the yen39;s declines pushed up the cost of raw material imports.

The Japanese currency sank to a 38year low against the U.S. dollar earlier this month. The yen39;s recent decline could put upward pressure on import costs.

Service sector…