JP: PMI Manufacturing Index

Tue Oct 31 19:30:00 CDT 2017

Actual Previous
Manufacturing - Level 52.8 52.9

The Nikkei Manufacturing PMI headline index fell to 52.8 in October, confirming a small decline from 52.9 in September but above the flash estimate of 52.5. This is the first fall in the index since July, though the survey continues to show relatively strong conditions in Japan's manufacturing sector.

Despite the small drop in the headline index, the survey's production index shows output increased in October at the fastest pace since May, with the survey's measures of employment growth also picking up. Respondents reported a solid increase in new orders, albeit at a slower pace than in September, and strong new export orders, boosted by demand from the China, Korea and Taiwan. The survey's measure of business confidence, however, fell to its lowest level since November 2016, though respondents generally remain optimistic about the twelve-month outlook.

Respondents reported input costs grew at a slightly faster pace in October and at their fastest pace in six months. Selling prices were also reported to have been raised at a pace matching the fastest since November 2014..

The small deterioration in manufacturing conditions indicated by the PMI survey contrasts with official forecasts for industrial production growth in October, published earlier in the week. Industrial production dropped 1.1 percent on the month in September, but officials expect this will be followed by an increase of 4.7 percent in October and then a decline of 0.9 percent in November.

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.