TOKYO, May 21 (Reuters) - Japan's manufacturing activity

slowed slightly in May, while service sector growth ground to a

halt for the first time in over a year, as surging costs linked

to the Middle East conflict weighed on confidence, a business

survey showed on Thursday.

-- The S&P Global flash Japan Manufacturing Purchasing

Managers' Index (PMI) fell to 54.5 in May, from 55.1 in April. A

reading above 50.0 indicates expansion, while below that level

signals contraction.

-- A key sub-index for factory output expanded for the fifth

straight month but the pace of growth eased from April. The

sustained rise in production was partly attributed to

stockpiling efforts as the Middle East war continued to disrupt

supply chains and drive up prices.

-- The service sector stagnated, with the flash Japan

services PMI index falling to 50.0 in May from 51.0 in April,

ending 13 months of growth.

-- Cost pressures intensified sharply across the private

sector. Input prices rose at the fastest pace since October 2022

due to supply disruption and raw material shortages stemming

from the Middle East conflict. Manufacturers experienced a

sharper rise in costs compared with the services sector.

-- In response to surging expenses, Japanese companies raised

their selling prices at the sharpest rate on record in nearly 19

years of data collection, though the pace of increase remained

slower than input cost inflation.

-- Annabel Fiddes, economics associate director at S&P Global

Market Intelligence, said: "If cost pressures continue to mount

and demand softens, business confidence and the broader economy

could come under greater strain in the months ahead."

-- Business confidence for the year ahead edged up to a

three-month high but remained historically subdued, with firms

expressing ongoing concerns over the war's impact on supply

chains and inflation.

-- The flash Japan composite PMI, which combines

manufacturing and services activities, fell to 51.1 in May from

52.2 in April, marking the softest pace of expansion in five

months.