JP: PMI Composite

Sun Feb 04 18:30:00 CST 2018

Actual Previous
Composite - Level 52.8 52.2
Services - Level 51.9 51.1

The Nikkei Composite Index for Japan increased to 52.8 in January from 52.2 in December, with conditions improving in both the manufacturing and services sectors. The Business Activity Index for Japan's services sector, also published today, advanced from 51.1 in December to 51.9 in January, while the manufacturing PMI survey, released last week, showed an increase in its headline index from 54.0 to 54.8.

The advance in the headline index for the services PMI in January was the first since October and reflected stronger new orders, with respondents' confidence about the twelve month outlook also increasing to its highest level since May 2013. The survey's measure of employment growth indicates employment in the sector increased for the thirteenth consecutive month though at a slightly slower pace than in December. The manufacturing survey also showed stronger new orders and employment growth in January.

The service sector survey shows price pressures have picked up in the new year, with the measure of input costs growth advancing to a near ten-year high, while selling prices were reported to have been increased for a third consecutive month and at the fastest pace since May 2014. Manufacturers also reported further increases in input costs and selling prices in January.

Japan's PMI surveys both suggest there has been a strong start to economic activity and business confidence in 2018, after both indicated that conditions improved in the last three months of 2017. Preliminary estimates for economic growth in the three months to December are scheduled for release next week.

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.