JP: PMI Manufacturing Index

Sun Oct 01 19:30:00 CDT 2017

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Manufacturing - Level 52.9 52.2

The Nikkei Manufacturing PMI headline index advanced to 52.9 in September, above the flash estimate of 52.6 and confirming an increase from 52.2 in August. After a large decline in June, this index has risen for three consecutive months and is now at its highest level since May. In line with recent regional trade data, the PMI survey suggests that the recent escalation in tensions between the North Korean regime and its neighbours has so far had little impact on economic activity or sentiment.

In line with the headline index, the survey's production index shows output increased in September at the fastest pace in four months. Respondents also reported a stronger increase in new orders and new export orders, with the latter growing at the fastest pace in seven months, boosted by improved demand from the United States and elsewhere in Asia. The survey's measure of business confidence about the twelve-month outlook also ticked higher in September, with respondents again expressing confidence about the likely impact on demand of the 2020 Olympic Games in Tokyo. The survey indicated that employment levels in the manufacturing sector rose for the thirteenth consecutive month in September but at the weakest pace since November 2016.

Respondents reported input costs grew at their fastest pace in five months in September. Selling prices, however, were reported to have been raised only marginally, consistent with official data showing headline inflation remains low.

The improvement in manufacturing activity indicated by the PMI survey contrasts with official forecasts for industrial production growth in September, published last week. Industrial production rose 2.1 percent on the month in August, but officials expect this will be followed by a decline of 1.9 percent in September and then an increase of 3.5 percent in October.

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.