JP: PMI Manufacturing Index

Thu Mar 31 21:00:00 CDT 2016

Consensus Actual Previous
Manufacturing - Level 49.1 49.1 50.1

The Japanese manufacturing PMI came in at expectations, at 49.1 for the lowest reading in more than 3 years and a definite step backward for the sector. A sharp contraction in international demand made for the sharpest decline in two years in new orders which in turn slowed job creation to a six-month low. Production contracted for the first time since April last year and both input prices and selling prices declined at quicker rates. Respondents in the sample cited instability in other Asian economies, including China and Taiwan, for the weakness in export orders. These results may not be a surprise but they point to increasing trouble for Japanese manufacturing.

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.