|Composite - Level||52.6||52.9|
|Services - Level||52.2||52.9|
The Nikkei Composite Index for Japan declined from 52.9 in March, a nineteen month high, to 52.6 in April. The Business Activity Index for Japan's services sector, also published today, also fell in April, dropping to 52.2 from 52.9 the previous month. This follows an increase in the headline index for the manufacturing PMI, published earlier this week, from 52.4 in March to 52.7 in April.
The fall in the headline index for the services PMI reflected a smaller increase in new orders reported by survey respondents, as well as slightly weaker (though still positive) employment growth and confidence about the twelve-month outlook for output. Respondents to the manufacturing survey also reported slightly weaker new orders in April.
Service sector respondents reported higher input costs in April but at the slowest pace in six months, resulting in only a slight increase in output prices. Manufacturers, in contrast, reported strong increases in both input costs and output prices in April.
Today's data suggest that conditions in Japan's service sector moderated in April but remain relatively strong, with the headline index still well above levels recorded in January and February. Together with the increase in the headline index for the manufacturing sector survey, this suggests that Japan's economy has made a solid start to the quarter in April. This is broadly consistent with the Bank of Japan's view that the economy is set to move from a "moderate recovery trend" to a "moderate expansion" over the near-term.
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.