|Composite - Level||52.8||52.0|
|Services - Level||52.3||51.8|
The Nikkei Composite Index for Japan increased from 52.0 in November to 52.8 in December, its highest level since August 2015. The Business Activity Index for Japan's services sector, also published today, rose from 51.8 to 52.3, its highest level since January 2016. This follows an increase in the headline index for the manufacturing PMI, published earlier this week, from 51.3 to 52.4.
Service sector respondents reported new orders rose in December at their fastest pace since July 2015, broadly in line with faster growth in new orders reported by manufacturers. The service sector survey also indicates that employment levels were steady in the sector in December after six consecutive months of job cuts. Input costs were reported to have grown at a steady pace in the services sector in December - in part reflecting higher wages - while output prices were reported to have declined slightly.
Together with the manufacturing PMI earlier this week, today's service sector PMI suggests that business conditions in Japan improved towards the end of 2016, with the quarterly average for the composite PMI index for the three months to December at its strongest level since the last quarter of 2015. This suggests that GDP data for the three months to December, scheduled for release mid-February, may also show a pick-up in growth.
The Markit Japan Composite Purchasing Managers Index (PMI) is based on original survey data collected from a representative panel of companies based in the Japanese manufacturing and service sectors. The Composite PM is a weighted average of the Manufacturing Output Index and the Services Business Activity Index, and is based on original survey data collected from a representative panel of over 800 companies based in the Japanese manufacturing and service sectors. Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month.
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.