November 5, 2018 / 11:47 AM / 12 days ago

Japan October services PMI rebounds after quake, natural disasters

TOKYO (Reuters) - Japan’s services sector grew strongly in October as new business expanded at the fastest clip in 5-1/2 years in a sign consumer spending bounced back after getting knocked by a series of heavy rains, flooding, and earthquakes, a private survey showed on Monday.

FILE PHOTO: Workers ride bicycles as a guard looks on at a factory in Keihin industrial zone in Kawasaki, south of Tokyo August 31, 2010. REUTERS/Toru Hanai/File Photo

The Markit/Nikkei Japan Services Purchasing Managers Index (PMI) rose to six-month high at 52.4 on a seasonally adjusted basis, from 50.2 September.

It marked the 25th consecutive month that the index held above the 50 threshold that separates expansion from contraction.

Some of the momentum seen last month though may peter out as new business expansion was largely driven by new contracts and work to recover from an earthquake and other natural disasters in September.

“Business activity expanded at the fastest pace in six months as firms observed the best monthly improvement in demand conditions since May 2013,” said Joe Hayes, economist at IHS Markit, which compiles the survey.

“However, many respondents noted that the rise in both output and new sales was a normalization effect following the business impact of natural disasters in September.”

The composite PMI, which includes both manufacturing and services, also rose to a five-month high of 52.5 from 50.7 in the previous month.

Businesses in the northern island of Hokkaido quickly resumed operations after a strong earthquake caused a island-wide blackout last month.

Business confidence remained solid due to optimistic sales forecasts and plans to increase investment, the survey showed.

That should be welcome news for policy makers as globally manufacturers are facing pressure from the heated U.S.-China trade war as well as a potential peak in corporate earnings.

A separate survey on Japan’s manufacturing PMI for October earlier this week showed the sector expanded at the fastest rate in four months. It was helped by new export orders returning to growth in a sign the world third biggest economy is exhibiting some resilience to global trade frictions.

Reporting by Stanley White; Editing by Shri Navaratnam

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