|Composite - Level||51.7||51.9|
|Services - Level||51.3||51.7|
January services PMI reading was 51.3, down from 51.7 in December. Nonetheless, it signaled a moderate increase in activity. Business activity has now risen for three successive surveys, marking the longest period of expansion in the past year. The composite output index posted at 51.7 in January, little changed from 51.9 in December and signalling a moderate rise in overall business activity.
Meanwhile, January data signaled a solid improvement in operating conditions in the Japanese manufacturing sector. Higher activity was supported by a return to new orders growth at the start of 2015. Although moderate, the latest rate of expansion posted above the average since the sales tax increase was implemented last April. Meanwhile, 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. Pressure on capacity was evident at Japanese services companies in January, as backlogs of work accumulated alongside the return to new orders growth. In contrast, volumes of unfinished work at manufacturers were unchanged, following a previous two-month period of readings signaling declines.
Payroll numbers at Japanese services providers continued to rise, extending the current period of staff recruitment to seven months. Service sector firms linked the hiring of staff to improved business conditions. Employment growth remained weak, however, with the vast majority of panelists noting no change in comparison to the previous survey period. Meanwhile, manufacturers continued to hire staff, although at a slightly slower pace than the previous month.
Inflationary pressures persisted at Japanese services firms in January, as signaled by a rise in input prices. According to panelists, an increase in raw material and wage costs were the main drivers behind the rise in purchasing prices. However, the rate of inflation slowed to the weakest in just under a year-and-a-half. Meanwhile, selling prices increased as several Japanese services firms passed on higher cost burdens onto their clients. The rise in charges was fractional, however.
Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the 'Report' shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the 'diffusion' index. This index is the sum of the positive responses plus a half of those responding 'the same'.
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.
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