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Japan service sector growth softens in July, new hiring slows: PMI

TOKYO (Reuters) - Japan's services sector expanded at a slower pace in July as new orders eased, a private survey showed on Thursday, in a sign that its economic activity may be moderating.

The Markit/Nikkei Japan Services Purchasing Managers Index (PMI) fell to a seasonally adjusted 52.0 from 53.3 in June.

But the index remained well above the 50 threshold that separates expansion from contraction for the 10th consecutive month.

Growth in new business eased but was still solid, with the reading dipping to 52.7 from 53.2. Companies continued to hire new staff but also at a slower pace.

The services sector PMI comes shortly after the final manufacturing PMI which showed Japan's factory activity grew at the slowest pace in eight months.

"Weaker expansion was registered across both manufacturing and service sectors in line with weaker gains in new business compared to previous months," said Paul Smith, senior economist at IHS Markit, which compiles the survey.

Taken together, the composite PMI, which includes both manufacturing and services, fell to 51.8 in July from 52.9 in June.

While the business surveys suggested some loss of momentum for the month, most recent official data had raised hopes that Japan's modest economic recovery may be on more stable footing, with a rebound in factory output in June, stronger household spending and exports rising for seven months in a row.

Inflation has been stubbornly weak, however, and well below the central bank's target.

The survey showed most service companies left prices unchanged in July despite a further rise in input costs, suggesting pressure on profit margins. A small number trimmed prices for the first time this year.

(Reporting by Stanley White; Editing by Jacqueline Wong)