Japan's economy continues its impressive run

Doubling down on the good news seen in China’s service sector PMI report for May, activity in Japanese services firms expanded at a faster pace last month with Markit’s PMI gauge rising to 51.5.

The reading, above the 51.3 level of April, is the fastest pace of expansion since November last year.

Here’s Markit on the improvement witnessed in May.

“A rise in service sector activity was supported by a further increase in new orders at Japanese services companies in May. Furthermore, the rate of expansion was the sharpest since November last year. A number of monitored firms mentioned improved marketing strategies helping to gain new clients and more favourable economic conditions leading to the latest increase in new work intakes.

Concurrently, service sector firms hired additional staff for the second month running. Although marginal, the rate of growth was broadly in line with the average seen over the past year-and-a-half. Some surveyed firms mentioned an improvement in business operations leading to higher payroll numbers. Similarly, employment growth at Japanese manufacturers was registered for the second consecutive month

Meanwhile, pressure on service sector capacity was evident, as backlogs of work accumulated alongside a further increase in new work intakes. The rate of growth in backlogs slowed, however, to only a fractional pace. In contrast, manufacturers reported a fall in backlogs for the third month running in May”.

Here’s a quick chart of the index, overlaid with Japanese GDP.

The uptick in the PMI gauge continues a promising trend for Japanese economic data with GDP, CPI and industrial production figures all beating expectations in recent weeks.

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