JP: PMI Manufacturing Index

May 31, 2017 07:30 CDT

Consensus Actual Previous
Manufacturing - Level 52.0 53.1 52.7

The Nikkei Manufacturing PMI headline index rose to 53.1 in May, well above the the flash estimate (and consensus forecast) of 52.0, and up from 52.7 in April. The index is now back just below the near three-year high recorded in February and indicates that Japan's manufacturing sector has now expanded for nine consecutive months.

The survey's production index shows output by manufacturers increased for the tenth consecutive month in May, with the pace of growth picking up from April. Respondents reported a stronger increase in new orders, with new export orders also posting solid growth though slightly down from the pace set in April. Respondents remain confident about the twelve month outlook for activity, with the survey's measure of employment also pointing to consistent jobs growth, in line with official labour market data.

Respondents reported a slightly weaker increase in input costs in May after a 28-month high in April, with aluminium and steel prices still making a significant contribution to headline growth. Firms also reported a small increase in selling prices. These have now risen for five months in a row, the longest run of consecutive increases in selling prices since late 2014 and early 2015.

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.