(Bloomberg) -- Key measures of Japan’s manufacturing and service activity weakened in June, with the services gauge registering a contraction for the first time in almost two years as companies faced strains from higher input costs.

The au Jibun Bank purchasing managers’ services index fell to 49.8 in June from 53.8 the previous month, dipping below the boom-or-bust 50 level for the first time since August of 2022, S&P Global reported Friday. The PMI reading for manufacturing slipped to 50.1, while the composite index fell to 50.

Services companies reported failed attempts to hire more staff, while also highlighting an erosion of margins as they struggled to pass on rising input costs to customers via price hikes, Jingyi Pan, Economics associate director at S&P Global Market Intelligence, said in a news release.

Consumer inflation in Japan picked up in May, with most of the pressure coming from cost-push factors including the weak yen and rising utility fees after the government began the process of phasing out subsidies. At the same time, the pace of gains in producer prices quickened more than expected in May, registering the fastest clip in nine months.

©2024 Bloomberg L.P.