TOKYO, Feb. 8 (Xinhua) -- Sentiment in Japan's service sector dropped markedly in January, owing in part to adverse weather conditions and an increasingly tight labor market, the government said in a report on Thursday.

According to the Cabinet Office's monthly "Economy Watchers" survey, the current conditions index tumbled 4.0 points from December last year to 49.9.

The reading follows a 0.2 point decline a month earlier and marks the largest drop since a consumption tax hike here in 2014.

As a result of its latest survey, the Cabinet Office downgraded its overall assessment of the economy saying it is "recovering as a trend" although has been negatively affected by heavy snow and cold weather conditions, in the recording period, among other factors.

Service sector sentiment, in addition to the adverse weather conditions, was also dragged down by a rise in energy and fresh food costs as well a tightening labor situation, the survey also showed.

The forward-looking index, which gauges conditions two to three months ahead, dropped 0.3 point to 52.4, in the recording period, following a 0.7 point decline a month earlier, the government's data also showed.

Segments of the economy surveyed in January included sectors such as retail, restaurant service, and taxi driving, and the monthly report serves as both a consumer confidence indicator and a leading indicator for the rest of the economy.

The drop in January's current conditions index was due to more people seeing business conditions in Japan as "getting worse" and less people saying things are "getting better."

The monthly government survey is gauged by a score above 50 -- the boom or bust line -- meaning the "watchers" surveyed have an optimistic feeling about business conditions and a score below 50 meaning the opposite.

The latest survey marks the first time the index has fallen below the 50 mark since July 2017.

The outcome of the monthly survey is followed closely by the Bank of Japan (BOJ) as it reflects retail sector sentiment more precisely than some other government data.

In its latest poll, the Cabinet Office surveyed 2,050 workers nationwide from Jan. 25 to 31 and the response rate was 1,854 workers or 90.4 percent.