JP: PMI Manufacturing Index

April 2, 2017 07:30 CDT

Actual Previous
Manufacturing - Level 52.4 53.3

The Nikkei Manufacturing PMI headline index fell to 52.4 in March, close to the flash estimate of 52.6, and confirming a fall in the index from 53.3 in February. Despite this drop in the headline index, the survey shows conditions remain much stronger than they were in mid-2016 and suggest that the manufacturing sector will make a solid contribution to economic growth in the three months to March.

The survey's production index shows output by manufacturers expanded for the eighth consecutive month in march, albeit at a somewhat slower pace than the near three-year high recorded in February. The new orders index, new exports orders index, and employment index also indicated slightly weaker though still solid increases in March. Similarly, an index tracking survey respondents' expectations about future output shows confidence in the outlook over the next twelve months weekend in March after hitting a record high in February.

Respondents also report that input prices grew strongly, in part reflecting recent weakness in the domestic currency. Selling prices, however, were broadly unchanged on the month, resulting in a further squeeze on margins.

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.