The Japan flash manufacturing PMI headline index rose to 52.8 in April from 52.4 in March (revised from a flash estimate of 52.6). The index is just below the near three-year high recorded in February and, if confirmed by final data to be released early next month, will indicate that activity in the Japanese manufacturing sector has expanded for an eighth consecutive month.
The increase in the headline index reflects a pick-up in the survey's output index, up from 53.0 to 53.6. Survey respondents also reported further growth in new orders so far in April, albeit at a slower pace than in March, and a stronger increase in both new export orders and employment. The survey also indicates price pressures have strengthened since the start of the month, with both input costs and selling prices reported to have increased at a faster rate than in March.
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. The flash index, usually released about a week before the final, gives a preliminary reading of conditions for the current 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.