Japan Aug PMI survey shows services expand at fastest pace in almost two years

TOKYO,(Reuters) - Activity in Japan's services sector expanded at the fastest pace in almost two years in August, a survey showed on Thursday, as companies turned more optimistic on business conditions in a sign the economy may be bouncing back.

The Markit/Nikkei Japan Services Purchasing Managers Index (PMI) rose to a seasonally adjusted 53.7 from 51.2 in July to reach the highest since October 2013.

The index remained above the 50 threshold that separates expansion from contraction for the fifth consecutive month.

The index for business expectations rose to 56.0 from 54.8 in the previous month to reach the highest since September 2013.

The index for new business eased slightly to 52.9 from 53.2 in July but still signalled solid demand.

The reading on the services sector could ease concern about the economy after disappointing industrial production and household spending data for July.

Japan's economy contracted in April-June as exports and consumer spending weakened, and the government is counting on a return to growth in the current quarter to fulfil its pledge to revitalise the economy after a decade of stagnation and deflation.

(Reporting by Stanley White; Editing by Richard Borsuk)