JP: PMI Manufacturing Index

January 3, 2017 06:30 CST

Consensus Actual Previous
Manufacturing - Level 51.9 52.4 51.3

The Nikkei Manufacturing PMI headline index rose to 52.4 in December, above the flash estimate of 51.9, and confirming a strong increase in the index from 51.3 in November. This in the index's highest level since December 2015 and provides further evidence of a solid improvement in manufacturing conditions towards the end of 2016.

The survey's production index shows output by manufacturers expanded for the fifth consecutive month in December and at the fastest pace for the year. The new orders index also rose a 12-month high, while the new exports orders index indicated solid external demand. Survey respondents noted increased trade volumes with customers in China, Europe and North America, perhaps suggesting that recent currency depreciation is starting to have an impact.

The survey also showed that manufacturers again added to payrolls in December and at the fastest pace since April 2014. Currency depreciation was cited as a factor pushing up input costs in December, but output prices were reported to be little changed.

With November data showing stronger year-on-year growth in industrial production, exports and retail sales, today's data provides evidence that activity has strengthened further in December. Officials may also welcome the potential inflationary impact of a weaker currency suggested by the survey's measure of input costs.

The Purchasing Managers' Manufacturing Index (PMI) is based on monthly questionnaire surveys of selected companies which provide an advance indication of what is really happening in the private sector economy by tracking changes in variables such as output, new orders, stock levels, employment and prices across the manufacturing sectors.

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.