TOKYO (Reuters) - Japanese manufacturing activity expanded at the fastest pace in more than seven years in November as domestic demand and exports improved, a survey showed on Friday, suggesting economic growth is picking up pace in the final quarter of 2013.
The Markit/JMMA Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 55.1 in November from 54.2 in October.
The index hit its highest since July 2006, having been above the 50 threshold that separates expansion from contraction since March.
The data suggests that domestic demand and exports are recovering strongly from a dip in the middle of the year, which means the economy could have enough momentum to weather an increase in the sales tax rate in April.
“If the pace of this expansion is maintained into 2014, it may serve to compensate for the expected weakening of consumer demand following April’s scheduled consumer tax hike,” said Claudia Tillbrooke, economist at Markit.
The November index for new export orders jumped to 57.2 from 53.1 in October, showing the fastest rate of growth in 3-1/2 years due to a weak yen and renewed demand from Thailand and Hong Kong.
The output index of the PMI rose to 59.0 in November from 57.7 the previous month, the fastest expansion in four years.
Prime Minister Shinzo Abe has overseen massive monetary and fiscal stimulus this year to revive the economy, which has now grown in the past four quarters.
However, there are concerns the increase in the sales tax rate to 8 percent from 5 percent next April could weaken consumer spending and cause the economy to slow markedly.
Reporting by Stanley White; Editing by John Mair