TOKYO, Nov 6 Reuters Japan39;s service activity contracted in October on weaker sales, with business confidence slipping to the lowest level since March 2022 on concerns over shortage of labour, a private survey showed on Wednesday.

The final au Jibun Bank Service purchasing managers39; index PMI dropped to 49.7 in October from 53.1 in September, according to an index publisher SP Global Intelligence.

It was slightly above a flash reading of 49.3 but fell below the 50.0 threshold separating expansion from contraction for the first time since June.

The strength of performance in the Japanese service sector came to an abrupt halt at the start of the fourth quarter, said Usamah Bhatti, economist at SP Global Market Intelligence, adding that the downturn was driven by slower sales.

The services industry has been a bright spot for the world39;s fourth largest economy, anchoring growth and offsetting some of the drag from a struggling manufacturing sector.

Lingering concerns over labour shortage weighed down the business outlook for the next 12 months, with the index hitting the lowest level in 31 months. Businesses, though, said the drop was a blip and overall confidence remained strong, Bhatti said.

New business inflows in October grew at a slower pace while overseas demand sank into contraction territory for the first time since July, the survey showed. The service sector also saw outstanding business falling for the second time in three months on soft demand.

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