JP: PMI Manufacturing Index

Mon Nov 30 19:35:00 CST 2015

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Manufacturing - Level 52.6 52.4

Manufacturing conditions in Japan improved substantially in November. Both production and new orders increased at marked rates, with the former expanding at the fastest rate since March 2014. The November manufacturing PMI posted at 52.6, up from 52.4 in October, thereby indicating an improvement in operating conditions at Japanese manufacturers. The reading was the highest in 20 months mainly reflecting a quicker expansion in production.

Subsequently, both employment and buying activity expanded during the month. On the price front, input prices increased at the fastest rate since July, although remained historically muted. Meanwhile, prices charged rose for the first time in three months.

Contributing to the overall improvement in manufacturing conditions was a sharp rise in production. The rate of increase was the quickest since March 2014, with 23 percent of surveyed companies noting higher output compared to October. Concurrently, new orders increased at a marked rate during the month. Firms linked greater new work intakes to success in gaining new clients and new product developments.

Total new order growth was supported by strong international demand as new export orders rose at the fastest rate since June. A number of surveyed companies mentioned greater demand from new customers, particularly from Asia.

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.