JP: PMI Composite

Wed Aug 02 19:30:00 CDT 2017

Actual Previous
Composite - Level 51.8 52.9
Services - Level 52.0 53.3

The Nikkei Composite Index for Japan fell from 52.9 in June to 51.8 in July, reflecting weaker conditions in both the services and manufacturing sectors. The Business Activity Index for Japan's services sector, also published today, dropped from 53.3 to 52.0, its lowest level since February, while the manufacturing PMI survey, released earlier in the week, showed a fall in its headline index from 52.4 in June to 52.1 in July..

The decline in the headline index for the services PMI in July reflects slower - though still positive - growth in new orders, with respondents to the manufacturing survey also reporting weaker growth in output and new orders in July. The services survey showed weaker confidence about the twelve month outlook, whereas manufacturers reported improved optimism. Both surveys' measures of employment indicated an increase in hiring in July.

Service sector respondents reported input costs rose at a slower pace in July compared with June, with selling prices said to have declined for the first time this year. The manufacturing survey showed gains in input costs and selling prices in July.

Today's survey data indicate that Japan's private sector made a solid start to the current quarter but that conditions have moderated to some extent since earlier in the year. Although the surveys show that Japanese companies are continuing to add to their payrolls, there remains little indication that this is putting significant upward pressure on wages and prices.

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.