JP: PMI Manufacturing Index

Wed Feb 28 18:30:00 CST 2018

Actual Previous
Manufacturing - Level 54.1 54.8

The Nikkei Manufacturing PMI headline index fell to 54.1 in February, just above the flash estimate of 54.0 but confirming a decline from 54.8 in January. Despite this drop, the index remains close to the multi-year peak recorded in January and continues to indicate solid growth in the Japanese manufacturing sector.

The fall in the headline index reflects a reported deceleration in output growth, with growth in new orders also easing in February though remaining relatively strong. The survey's measure of new export orders also moderated from the multi-year high recorded in January. Respondents, however, reported stronger hiring in January, with the survey's measure of employment increasing to an 11-year high, while confidence about the twelve-month outlook also remains at high levels.

Today's survey indicates that price pressures moderated in February but remain relatively strong, broadly consistent with the recent upward trend in underlying CPI inflation and the forecasts of officials at the Bank of Japan. Respondents reported that higher global oil prices helped push up both input costs and selling prices, but at a pace below that recorded in January.

The fall in the PMI survey's headline index in February contrasts with official forecasts for industrial production growth, published earlier in the week. Industrial production fell 6.6 percent on the month in January, but officials expect this will be followed by an increase of 9.0 percent on the month in February before a drop of 2.7 percent in March.

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.