TOKYO (Reuters) - Japan's services sector activity expanded in May, bouncing back from a contraction in the previous month due to a modest increase in new orders, a private survey showed on Friday.
The Markit/Nikkei Japan Services Purchasing Managers Index (PMI) rose to 50.4 in May from 49.3 in April on a seasonally adjusted basis.
The index returned above the 50 threshold that separates expansion from contraction and showed activity expanded at the fastest since February, though the rate of change signaled only a mild improvement in business conditions.
The index for new business rose to 50.4 from 50.2 in the previous month.
The composite index for output in both manufacturing and services rose to 49.2 in May from 48.9 in the previous month, but remained in contractionary territory for a third month.
In 2014, services accounted for 65 percent of Japan's gross domestic product, while manufacturing had a 21 percent share.
Japan's economy expanded at the fastest pace in a year in the first quarter, thanks in part to a leap year consumption boost, but analysts say the rebound is not strong enough to dispel concerns over a contraction this quarter.
Prime Minister Shinzo Abe announced on Wednesday his widely expected decision to delay a scheduled April sales tax increase by two-and-a-half years, putting his plans for fiscal reforms on the back burner due to growing signs of weakness in the economy.