In October, consumer morale improved as Japan's COVID-19 infections subsided, resulting in a broad-based increase in demand. This was the first time the country's services sector had grown in 21 months.
Japan's health officials lifted the state of emergency restrictions set to contain the health crisis in September, as the number of new cases and mortalities dropped dramatically for that month and the strain on the medical system was relieved.
Japan's service sector establishments reported that activity has returned to the much-awaited expansion territory for the first time in almost two years, Usamah Bhatti, an economist at IHS Markit, disclosed.
Despite the fact that the rate of job creation has slowed to a three-month low, most companies in Japan have continued to develop capacity in expectation of a gradual rebound in demand, Bhatti said.
The final Jibun Bank Japan Services Purchasing Managers' Index (PMI) was up to the 51 mark from 48 in the previous month, matching a so-called flash reading. The index was amended upward from the previous month's figure.
This meant that activity in the services sector remained over the 50 threshold that distinguishes contraction from expansion for the first time since January last year, just before the Japanese economy entered its deep pandemic recessionary phase.
The retreat lasted 20 months, the longest such sequence since a 27-month stretch from March 2010 to March 2011, which occurred during the global financial crisis.
Some economists said a sharper recovery in service sector optimism will more than compensate for a slowdown in output and exports, which are being hampered by a protracted chip and parts supply deficit around the world.
Japan's PMI survey shows the country's services sector has had the largest increase in input prices since November 2019, while new and outstanding business has remained in contraction despite an increase in overall company activity during the same period.
The government's composite PMI, which is computed by combining data from both manufacturing and services, increased for the first time in six months, climbing to 51 from September's final reading of 48 to mark a significant improvement.
