Japan services PMI bounces off in October

In October, Japan's services sector managed to rally because new business expanded at the fastest tempo for 5-1/2 years, hinting that spending rebounded getting impacted by flooding, heavy rains as well as earthquakes. That’s what a private poll revealed on Monday.

On a seasonally updated basis, the Markit/Nikkei Japan Services Purchasing Managers Index surged to six-month peak of 52.4 in contrast with September’s reading of 50.2.

Apparently, it marked the 25th month in a row that the index stood above the 50 mark, separating contraction from expansion.

Some of the momentum observed in October although might fade away as new business expansion was mostly powered by new contracts and work to recover from earthquakes as well as other natural disasters in September.

As a matter of fact, business activity managed to expand at the fastest tempo for six months because companies observed the best monthly improvement in demand conditions since May 2013.

However, a lot of respondents told that the ascend in both output as well as new sales appeared to be a normalization effect after the business impact of natural disasters in September.

Including both services and manufacturing, the composite PMI also grew to a five-month peak of 52.5 in contrast with October’s reading of 50.7.

Companies in the northern island of Hokkaido rapidly resumed operations after a powerful earthquake generated an island-wide blackout in October.

As for business confidence, it was still firm because of good sales forecasts as well as plans to ramp up investment, as the survey disclosed.

It should be upbeat news for policy makers due to the fact that globally manufacturers are being pressured from the heated US-China trade conflict and as a potential maximum in corporate earnings.

According to a separate poll on Japan's manufacturing PMI for last month, the sector managed to expand at the fastest tempo for four months.