JP: PMI Manufacturing Index

Tue Jun 30 20:35:00 CDT 2015

Actual Previous
Manufacturing - Level 50.1 50.9

The rate of improvement in operating conditions at Japanese manufacturers slowed in June. Production growth weakened alongside a decline in new work. According to anecdotal evidence, a reduction in capital investments and challenging economic conditions led to the recent contraction in total new orders. Despite this, employment levels remained in growth territory for the third month in a row. The PMI reading for June was 50.1, down from 50.9 in May.

However, international demand strengthened as new export orders increased at the fastest pace in one-and-a-half years. A number of panelists mentioned favorable exchange rates helping to improve price competitiveness, while others mentioned greater sales volumes with China and Europe.

Production growth slowed to a fractional pace, while new orders returned to contraction territory. In contrast, new export orders increased at the fastest pace since December 2013, with reports of a favorable exchange rate helping to improve price competitiveness. Meanwhile, input prices increased, albeit at a historically muted pace, while charges rose for the second straight 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.