Japan's service sector activity expands at fastest pace in 2 years

Japan's services sector activity grew at the fastest pace in more than two years in November on a jump in new business, signalling stronger consumer confidence as the coronavirus pandemic subsided.

The world's third-largest economy has lagged other advanced nations in its recovery from the pandemic's hit with coronavirus curbs crimping activity for parts of the year.

The final au Jibun Bank Japan Services Purchasing Managers' Index (PMI) rose to a seasonally adjusted 53.0 from the prior month's 50.7 and a 52.1 flash reading.

That marked the fastest pace of expansion since August 2019.

"New orders rose for the first time since January 2020 as panel members cited the lifting of state of emergency measures had boosted confidence and sales," said Usamah Bhatti, economist at IHS Markit, which compiles the survey.

"Despite increasing demand and evidence of pressure on capacity, Japanese service providers decreased staffing levels for the first time since July."

Stronger spending on dining out, overnight stays and other services would likely support Japan's economy as a persistent global chip shortage and soaring raw material prices pressure manufacturers.

"Both manufacturers and services firms pointed to prominent rises in cost pressures in November," Bhatti said.

The composite PMI, which is estimated using both manufacturing and services, expanded at the fastest rate in more than four years, rising to 53.3 from October's final of 50.7.