|Composite - Level||50.1||49.0|
|Services - Level||50.4||49.4|
July business activity index was 50.4, up from 49.4 in June and signaling a slight increase in output in the service sector. New orders decreased at a slower rate, contrasting with the sharpest decline in nearly five years seen in the previous survey period. However, firms were still cautious towards their hiring policies, with employment declining for the second month running. The composite output index reading was 50.1, up from 49.0 in June.
New orders placed at Japanese services firms fell for the second straight month in July, but at a much slower pace. The rate of decline was marginal and softer than the historical average. Meanwhile, production at Japanese manufacturers declined for the fifth month running, albeit at a slowest pace since March.
Meanwhile, for the second successive month employment at Japanese services firms declined in July. The rate of job shedding picked up and was the sharpest in nine months. Data suggested that firms were less upbeat towards the future making them cautious about taking on additional workers. Meanwhile, employment growth at manufacturers picked up slightly in July, albeit remained marginal overall.
Cost pressures remained relatively muted at Japanese services firms, with input prices increasing only marginally. As a result, services companies reduced their charges. Meanwhile, the stronger yen/dollar rate benefitted goods producers, as input prices declined at the sharpest rate in nearly four years. This allowed manufacturers to reduce their selling prices and to the greatest extent since January 2013.
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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