JP: PMI Composite

Tue Apr 03 19:30:00 CDT 2018

Actual Previous
Composite - Level 51.3 52.2
Services - Level 50.9 51.7

The Nikkei Composite Index for Japan fell to 51.3 in March from 52.2 in February, with conditions weakening in both the manufacturing and services sectors. The Business Activity Index for Japan's services sector, also published today, fell from 51.7 in February to 50.9 in March, its lowest level since late 2016, while the manufacturing PMI survey, released earlier in the week, showed a drop in its headline index from 54.1 to 53.1.

The drop in the headline index for the services PMI in March reflected weaker new orders, which grew at their slowest pace in eighteen months. Service sector respondents, however, reported slightly stronger employment growth last month The manufacturing survey showed weaker growth in output, new orders, and employment in March. Business confidence about the twelve month outlook remains relatively strong across both sectors, with firms continuing to cite the 2020 Olympic Games in Tokyo as a positive factor.

The service sector survey shows margins tightened in March, with input costs rising strongly but selling prices increased at the slowest pace in three months. Manufacturers reported strong increase in both input costs and selling prices in March.

The PMI surveys show that conditions have weakened in both the services and manufacturing sectors for two consecutive months after a strong start to the year in January. Respondents, however, remain confident about the outlook, consistent with the quarterly Tankan survey, published earlier in the week, which showed business confidence across both sectors was relatively steady in the three months to March.

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.