|Composite - Level||52.2||52.3|
|Services - Level||51.5||51.6|
December services PMI reading was 51.5, slightly lower than the 51.6 recorded in the previous month. New business growth at Japanese services companies accelerated to a four month high at the end of 2015. This supported a further expansion in activity. Meanwhile, employment increased for the first time in three months and at the sharpest rate since September 2014. On the price front, both input and output prices rose further, with purchasing prices increasing at the quickest rate since July.
The December composite output index posted at 52.2, down from 52.3 in November. Production growth at Japanese manufacturers increased at a marked rate, one that was unchanged from November's 20-month high. Supporting growth in service sector activity was a solid rise in new orders. New work intakes increased at the most marked rate since August. According to panelists, greater demand stemming from the launch of new products led to an expansion in new business. Meanwhile, new orders at Japanese manufacturers increased at the sharpest rate since October 2014.
For the first time in three months, employment at service providers increased in December. Moreover, the rate of job creation was the sharpest in 15 months. Panelists mentioned the hiring of extra staff to cope with greater activity requirements. Similarly, workforce numbers at Japanese manufacturers increased at a marked rate.
On the price front, reports of increased staff, medicine and food costs led to a rise in input prices in the service sector. Moreover, the rate of inflation was the sharpest since July. As a result, service providers tried to pass their higher cost burdens on to clients as selling prices increased. In the goods producing sector, input prices increased at a softer rate, helping to encourage a fall in charges.
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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