JP: PMI Manufacturing Index

Mon Aug 31 20:35:00 CDT 2015

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Manufacturing - Level 51.7 51.2

Operating conditions in the Japanese manufacturing sector improved noticeably in August with new order growth accelerating to a seven month high. This was also supported by increases in both production and employment. In contrast, growth in new export orders slowed further and was only moderate overall. Falling trade volumes with China was reported to have led to weaker international demand. Meanwhile, prices charged rose at a slight rate, but input prices remained unchanged, having risen in the previous month.

The August manufacturing PMI climbed to 51.7 from 51.2 in July and the second highest so far in 2015. The reading signaled a stronger rate of improvement in operating conditions in the Japanese manufacturing sector. Moreover, the latest reading was the second-highest of 2015 so far. Concurrently, production remained in growth territory for the fourth month in a row. That said, the rate of growth moderated from July's five-month high and was only modest overall.

The overall improvement was supported by a sharp increase in new orders, with growth accelerating to the fastest since January. According to respondents, successful gains in new clients and advertising campaigns had led to the latest expansion. All three sectors registered growth in new work, with investment goods producers reporting the sharpest increase.

Resulting from expansions in both output and new orders, job creation was reported at Japanese manufacturers for the fifth successive survey period. Furthermore, the rate of staff hiring was little-changed from the seven-month high seen at the start of Q3.

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.