TOKYO (Reuters) - Japan's services sector activity grew at the fastest clip in four months in October, a private survey showed on Friday, as the easing of restrictions on foreign tourism and an improvement in domestic travel boosted sentiment.
Despite the pickup in activity, however, high import costs heaped pressure on the sector as prices of fuel, energy and raw materials increased.
The final au Jibun Bank Japan Services purchasing managers' index (PMI) rose to a seasonally adjusted 53.2 from the prior month's 52.2, growing at the quickest rate since June.
"Survey respondents suggested that the latest improvement was primarily underpinned by the growth within the tourism industry and the subsequent strengthening in demand conditions," said Laura Denham, economist at S&P Global (NYSE:SPGI) Market Intelligence, which compiles the survey.
"However, inflationary pressures currently being faced by Japan's service providers continued to present downside risks to the sectors potential growth."
On top of the windfall from brighter conditions in inbound and domestic tourism, new business got a lift from a sustained COVID-19 recovery as the drag from the pandemic eased.
October's final reading was slightly better than a 53.0 flash figure released last month, the survey showed. Activity came in above the 50-mark that separates expansion from contraction for the second consecutive month.
The composite PMI, which is calculated by combining the manufacturing and services readings, stood at 51.8 in October, up from the previous month's 51.0 final.