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Japan's service sector activity grows for first time during pandemic

·2-min read
FILE PHOTO: People walk at a crossing in Shibuya shopping area, amid the coronavirus disease (COVID-19) pandemic, in Tokyo

TOKYO (Reuters) - Japan's services sector activity grew for the first time in 21 months in October as consumer sentiment picked up after the coronavirus pandemic subsided, giving a broad-based boost to demand.

The government in September ended state of emergency curbs imposed to contain the health crisis, as new cases and deaths came down rapidly that month and the burden on the medical system eased.

"Japanese service sector firms reported that activity returned to expansion territory for the first time in nearly two years," said Usamah Bhatti, economist at IHS Markit, whichcompiled the survey.

"Firms continued to build capacity in anticipation of a gradual recovery in demand, despite the rate of job creation easing to a three-month low."

The final au Jibun Bank Japan Services Purchasing Managers' Index (PMI) rose to a seasonally adjusted 50.7 from the previous month's 47.8, matching a flash reading.

That meant services sector activity stayed above the 50.0 threshold that separates contraction from expansion for the first time since January 2020, before the economy went through its deep COVID-19 slump.

The 20 months of decline was the longest such streak since a 27-month run through March 2010, during the global financial crisis.

Some economists hope a stronger recovery in service sector sentiment will offset a slowdown in output and exports, which are being hit by a persistent global chip and parts supply shortage.

The PMI survey showed the services sector saw the biggest jump in input prices since November 2019, while new and outstanding business remained in contraction despite the expansion in overall business activity.

The composite PMI, which is calculated using both manufacturing and services, expanded for the first time in six months, rising to 50.7 from September's final of 47.9.

(Reporting by Daniel Leussink; Editing by Sam Holmes)

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