JP: PMI Manufacturing Index

Sun Jan 04 19:35:00 CST 2015

Actual Previous
Manufacturing - Level 52.0 52.0

The December reading of the manufacturing PMI signaled sustained activity growth in the Japanese manufacturing sector. Production increased at a solid pace, underpinned by a further rise in new orders. Payroll numbers continued to increase, with the latest growth rate the fastest since May. Amid reports of the depreciation of the yen, upward pressures on prices remained, with input price inflation accelerating to an 11-month high. The PMI reading was 52, unchanged from November signalling a continued improvement in operating conditions in the Japanese manufacturing sector. The latest reading extended the current run of growth to seven months.

Output increased for the fifth month running and was supported by a further increase in new orders from both the domestic and international markets. New business growth was solid in December, with survey panelists attributing the rise in orders to improved marketing strategies and to success in gaining new clients. Meanwhile, new exports orders increased for the sixth month running. Staffing numbers at Japanese goods producers rose for the third month in a row to the fastest pace observed since May.

Input prices rose at a sharp rate in December, with input price inflation accelerating to the fastest since January. A steep increase in raw material costs stemming from the depreciation of the yen was commonly cited as the main factor behind the latest sharp rise in input costs. Charges, meanwhile, rose at only a fractional rate.

The Markit/JMMA Japan Manufacturing PMI is a composite index based on five of the individual indexes: New Orders, Output, Employment, Suppliers' Delivery Times and Stock of Items Purchased. The Delivery Times Index is inverted so that it moves in a comparable direction.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.