JP: PMI Manufacturing Index

Sun May 31 20:35:00 CDT 2015

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Manufacturing - Level 50.9 49.9

Japan's manufacturing PMI improved contraction to expansion in May. The manufacturing PMI reading was 50.9, up from 49.9 in April. It signaled a return to positive improvements in operating conditions at manufacturers. Although a modest advance overall, the latest expansion was in line with the average seen this year so far.

Growth in both production and new orders resumed, after having fallen in April. Concurrently, employment growth was sustained for the second straight month, while buying activity increased for the first time in three months. Meanwhile, input prices rose at the weakest rate in the current 29-month sequence of inflation.

According to survey participants, the latest expansion was supported by an increase in client demand and greater productivity. Both consumer and investment goods producers signaled expansions in output, with the former registering the faster rate. A rise in production was matched by an increase in new orders at Japanese goods producers. The rate of expansion was marginal but nevertheless above the long-run series average.

New export orders continued to grow for the eleventh successive month. However, the rate of expansion was fractional, with the vast majority of monitored firms noting no change in comparison to the prior month.

On the price front, input costs continued to increase, although at the weakest rate in the current 29-month sequence of inflation. Where purchasing prices rose, firms mentioned the depreciation of the yen driving up imported raw material prices. Subsequently, charges increased, albeit at a weak 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.