JP: PMI Composite

April 4, 2017 07:30 CDT

Actual Previous
Composite - Level 52.9 52.2
Services - Level 52.9 51.3

The Nikkei Composite Index for Japan rose from 52.2 in February to 52.9 in March, a nineteen-month high. The Business Activity Index for Japan's services sector, also published today, also increased to a nineteen-month high of 52.9 from 51.3 the previous month. This follows a decline in the headline index for the manufacturing PMI, published earlier this week, to 52.4 from 53.3.

The increase in the headline index for the services PMI reflected solid growth in new orders and improved confidence among respondents about the 12-month outlook. The survey also indicates that employment in the services sector rose for the third consecutive month, consistent with official data showing strong labour m market conditions. Manufacturers also reported increases in new business and payrolls in March.

Like manufacturers, service sector respondents reported higher input costs in March but at a slower pace than recorded in both February and January. The services survey also showed a slightly stronger increase in selling prices in March, whereas the manufacturing survey suggested selling prices in that sector were broadly unchanged.

March PMI surveys show that activity has been relatively strong in both the manufacturing and services sectors since the start of the year. This is broadly in line with Tankan survey data released earlier this week and also suggests that GDP data for the three months to March will likely show a pick-up in economic growth in the domestic economy.

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.