JP: PMI Manufacturing Index Flash

Tue Feb 20 18:30:00 CST 2018

Actual Previous Revised
Level 54.0 54.4 54.8

The flash estimate for the Japan manufacturing PMI headline index in February is 54.0, down from the final estimate of 54.8 for January (revised from a flash estimate of 54.4). If confirmed by final data to be released early next month, this will indicate that activity in the Japanese manufacturing sector remains relatively strong after the index reached its highest level in January since early 2014.

The fall in the headline index in February was driven by declines in the survey's measures of output and new orders, which both showed growth at the slowest pace since October. Survey respondents also reported weaker growth in new export orders, likely reflecting the recent appreciation in the domestic currency. Employment in the manufacturing sector, however, was reported to have increased at the faster pace in nearly a year despite a fall in the survey's measure of confidence about the twelve-month outlook. Currency appreciation also appears to have dampened price pressures, with respondents citing this as factor driving weaker growth in output prices. Input prices also reported to have risen at a slower pace in February.

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. The flash index, usually released about a week before the final, gives a preliminary reading of conditions for the current 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.