JP: PMI Manufacturing Index

Sun Feb 01 19:35:00 CST 2015

Actual Previous
Manufacturing - Level 52.2 52.0

January manufacturing PMI edged up to a reading of 52.2 from 52.0 in December. January was the eighth month that the manufacturing sector signaled growth. January data registered a rise in production for the sixth month running at Japanese goods producers. The latest increase in output was supported by higher new work intakes from both domestic and international markets.

New work at Japanese manufacturers rose for the eighth month running, with the rate of expansion ticking up from the previous survey period to a three-month high. Panelists attributed the latest increase to a combination of improved advertising, stronger demand conditions and the launching of new products. Similarly, new orders from abroad were up in January. All three monitored sectors signaled growth in new work from both domestic and foreign clients, with investment goods producers noting the strongest increases in both cases.

In line with higher production requirements and stronger demand conditions, manufacturers continued to hire staff and purchase pre-production goods in January. Stocks of purchases rose, with firms linking the increase to greater production capacity. The accumulation of stocks was only fractional, however.

The depreciation of the yen against the U.S. dollar continued to have a negative effect on raw material prices, driving up input prices at a marked pace. Subsequently, manufacturers passed higher cost burdens on to their clients, with charges increasing at a quicker pace than the previous month.

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.