Activity in Japan's service sector dipped unexpectedly in May, data showed on Friday, but economists said it was probably a blip and that the economy was still recovering. The tertiary sector index, a yardstick for conditions in the services industry, fell 1.0 percent from April, the government said. The all-industries index, which covers a broader range of economic activity and includes the tertiary index, fell 0.7 percent from the previous month. Economists polled by had expected a rise of 0.1 percent in both the tertiary and all-industries indices and most shrugged off the weakness in the figures. "We had two months of very significant gains, so the drop in May is basically a reaction to that. The April-May average is still above the January-March average, so the growth trend is intact," said Takehiro Sato, an economist at Morgan Stanley.
"We're still expecting April-June GDP growth to come in at 4-5 percent on an annualised basis, which is slower than the 6.1-percent growth in January-March but still very good." Details showed the fall in the tertiary sector was partly led by a 3.2 percent fall in activity in the wholesale and retail industry, casting doubts on the view that the export-led recovery of the past year was filtering through to consumption. But Naoki Murakami, senior economist at Goldman Sachs, said it was not enough to change his positive outlook on the economy. "Even if there is a decline in exports, capital spending and personal consumption will continue to pull the economy upward," he said. Supported by rising exports and a pick-up in capital spending, Japan's economy grew at an annualised pace of 6.1 percent in the January-March quarter, its best showing in more than a decade. Economists recently polled by forecast GDP would grow 3.5 percent in the current fiscal year and 1.8 percent in the following year. Scorching summer temperatures are also expected to boost economic activity as consumers spend more on goods such as air conditioners, sunglasses and beer. Earlier this week, the temperatures in Tokyo rose as high as 39.5 Celsius (103 Fahrenheit), the hottest since Japan's Meteorological Agency started keeping records in 1923.///