Tokyo, March 24 (Bloomberg) -- Japan's all-industry activity index rose in January for the first time since August, led by gains in demand for retail and transportation services. The index, regarded as a proxy for the domestic economy, rose 1.7 percent from December, seasonally adjusted, the Ministry of Economy, Trade and Industry said. Economists surveyed by Bloomberg news expected a 0.8 percent rise, after a 0.6 percent drop in December. While a sustained recovery in consumption, which accounts for more than half of the economy, is good news for Japan, economists say the gains may be limited because consumer spending may weaken in coming months as unemployment rises. ``The rise in retail services was a rebound from the poor performance in December,'' said Seiji Adachi, an economist at Credit Suisse First Boston Japan Ltd. ``Consumer sentiment remains weak with demand weakening for entertainment services, suggesting this rebound in the index may be limited.'' The tertiary index, which encompasses service companies and accounts for about 60 percent of the all-industry index, rose for the first time since August to a seasonally adjusted 1.8 percent in January.
Japan Airlines, Sanrio
The U.S.-led attack on Iraq may curb air travel and disrupt trade, hurting transportation companies such as Japan Airlines System Corp. Earlier this month, the world's third-biggest carrier said it will reduce flights to Indonesia and Paris because concern about the war and a weaker economy had eroded demand on some international routes. Demand for travel-related services fell 5.4 percent in January, the Ministry said. Sanrio Co. Ltd., the maker of Hello Kitty character goods, slashed its sales forecast for the year ending March 31 to by 7.1 percent and said it would close 18 stores to cut costs. The all-industry index is used as a proxy for gross domestic product because it adds industrial production, construction, agriculture and government spending to the tertiary index. ``While these numbers show substantial improvement, it's too early to say whether this is an upward trend,'' said Ministry spokesman Kazuaki Hasegawa. The 109-member Topix Services Index, which tracks the performance of software, security, data and other services companies, has lost 12 percent of its value this year, compared with the broader Topix Index's 1.8 percent decline. //www.quote.bloomberg.com