JP: PMI Manufacturing Index

Mon Jul 31 19:30:00 CDT 2017

Actual Previous
Manufacturing - Level 52.1 52.4

The Nikkei Manufacturing PMI headline index fell to 52.1 in July, just below the flash estimate of 52.2, and confirming a fall from 52.4 in June. The index shows activity in the sector has now expanded for eleven consecutive months but at the slowest pace since last November.

In line with the headline index, the survey's production index shows output by manufacturers increased again in July, but at a pace slower than that recorded in June. Respondents also reported a smaller increase in new orders and new export orders, with the latter growing at the weakest pace in nearly a year. The survey's measure of business confidence about the twelve-month outlook, however, advanced to the highest level since it was initiated over five years ago, with survey respondents reporting confidence about the prospect of new product launches and preparations for the 2020 Olympic Games in Tokyo. The survey also indicated that employment levels rose for the twenty-second consecutive month, albeit at the slowest pace since the start of this year.

Respondents reported another solid increase in input costs and a marginal increase in selling prices in July, broadly in line with recent official producer and consumer price data.

Industrial production data released earlier this week showed an increase of 1.6 percent on the month in June. Officials expect output to increase 0.8 percent on the month in July and by 3.6 percent in August.

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.