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Japan's services sector activity growth nears 2-year high in August

Japan's services sector activity grew at the fastest rate in nearly two years in August following a slight easing in July, though new business growth cooled to a 13-month low, survey data compiled by Jibun Bank Corp. and IHS Markit showed.

The seasonally adjusted Jibun Bank Japan Services Purchasing Managers' Index climbed to 53.3 in August from 51.8 in the previous month, marking the sharpest rate of growth since October 2017. The month-over-month expansion was "a notable improvement" compared to the average figures recorded in the year to date, the survey said.

Sales and demand climbed, while new businesses from international markets grew at the fastest rate in nine months. Despite the increase, new business growth still came in at the lowest since July 2018, with some respondents suggesting that unfavorable weather negatively impacted demand.

Meanwhile, there were "signs to suggest caution, particularly in the forward-looking indicators," said Joe Hayes, an economist at IHS Markit. The index for new orders pointed to only marginal growth in sales, while business optimism held steady at subdued levels.

The Composite Output Index, which includes manufacturing and services activities, rose to an eight-month high of 51.9 in August from 50.6 in July, signaling the fastest expansion in private sector output since December 2018. Volumes of new work continued to grow, while backlogs of work increased for the first time this year.

Business confidence remained subdued, the survey added.