Japan March services PMI shows slowest growth in 17 months as new orders ebb

TOKYO (Reuters) - Activity in Japan's service sector expanded at the slowest pace in 17 months in March as new business growth cooled, suggesting a slight moderation in overall economic growth.

The Markit/Nikkei Japan Services Purchasing Managers Index (PMI) fell to 50.9 in March on a seasonally adjusted basis from 51.7 in February.

It was the lowest reading since October 2016, although the index remained above the 50 threshold that separates expansion from contraction for the 18th consecutive month.

"Despite PMI data signalling disappointing output and demand conditions, prospects appear upbeat," said Joe Hayes, economist at IHS Markit, which compiles the survey.

"Incoming new business has grown for 20 successive survey periods, and firms expect this trend to continue, as indicated by a solid degree of optimism towards future activity."

The index for new business eased to 51.0 from 51.9 in February, though future business expectations fell only a touch with overall optimism levels remaining robust.

The reading for employment also rose as companies hired more workers.

The composite PMI, which includes both manufacturing and services, fell to 51.3 from 52.2 in February.

Japan's economy has expanded for eight consecutive quarters, the longest uninterrupted streak since a 12-quarter run of growth during the mid-to-late 1980s boom.

A final reading on a separate manufacturing survey also showed some modest loss of momentum in the factory sector, suggesting the pace of economic growth could slow over the year if consumer spending ebbs.

(Reporting by Stanley White; Editing by Shri Navaratnam)