TOKYO, Aug 4 (Reuters) - Japan's services sector activity shrank at a faster pace in July to contract for the 18th consecutive month as curbs rolled out to combat a resurgence in coronavirus infections dealt a blow to business activity and confidence.
Activity and new business inflows contracted at a faster pace as the spread of the coronavirus undermined the world's third-largest economy's recovery prospects by hurting both confidence and sales.
The final au Jibun Bank Japan Services Purchasing Managers' Index (PMI) dropped to a seasonally adjusted 47.4 from the previous month's final 48.0 level, and compared with a 46.4 flash reading.
The reading marked the 18th month that services activity came in below the 50.0 threshold that separates contraction from expansion, the longest such streak since a 27-month run through March 2010.
"The Japanese services economy signalled that demand conditions remained subdued," said Usamah Bhatti, economist at IHS Markit, which compiles the survey.
"Lower demand led Japanese service providers to decrease staffing levels for the first time since December 2020."
Japan decided on Friday to expand state of emergency curbs to three prefectures near Olympic host city Tokyo and the western prefecture of Osaka, posing further potential headwinds to services sector activity ahead.
But the survey still showed firms remained optimistic about conditions for the 12 months ahead, though they were slightly less positive than in the previous month.
The final au Jibun Bank Flash Japan Composite PMI, which is calculated using both manufacturing and services, edged down to 48.8 from June's final of 48.9. (Reporting by Daniel Leussink; Editing by Sam Holmes)