JP: PMI Manufacturing Index Flash

Sun Jul 23 19:30:00 CDT 2017

Actual Previous Revised
Level 52.2 52.0 52.4

The flash estimate for the Japan manufacturing PMI headline index in July is 52.2, down from the final estimate of 52.4 for June (revised from a flash estimate of 52.0). If confirmed by final data to be released early next month, this will indicate that activity in the Japanese manufacturing sector has expanded for eleven consecutive months but at the weakest pace since November 2016.

The small drop in the headline index reflects a bigger decline in the survey's output index, down from 52.2 in June to 51.4 in July, the lowest level in ten months. Survey respondents also reported slower - though still positive - growth in new orders and no change in the growth of new export orders. These factors were partly offset by an increase in the survey's employment index, with respondents also reporting improved confidence about the outlook. Both input costs and selling prices were said to have increased at a slower pace in July than in June.

The PMI's survey headline index has moved in a fairly narrow range since late 2016 and, despite falling in each of the two last months, continues to indicate a solid expansion in Japan's manufacturing sector. This is broadly consistent with official data which have shown year-on-year growth in industrial production trending higher since the start of the year.

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.