JP: PMI Manufacturing Index

Sun Apr 01 19:30:00 CDT 2018

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Manufacturing - Level 53.1 54.1

The Nikkei Manufacturing PMI headline index fell to 53.1 in March, just below the flash estimate of 53.2 and confirming a drop from 54.1 in February. This is the second consecutive fall in the index but still suggests that activity in the Japanese manufacturing remains relatively strong after the index reached its highest level in January since early 2014.

The fall in the headline index reflects weaker but still positive reported growth in both output and new orders in March. The survey's measure of new export orders also moderated further from the multi-year high recorded in January, while respondents reported a weaker increase in payrolls. Nevertheless, the survey's measure of business confidence about the twelve-month outlook remains at high levels, with firms continuing to cite the 2020 Olympic Games in Tokyo as a positive factor.

Today's survey indicates that price pressures picked up sharply in March. Respondents reported that higher global fuel and metal prices helped push up both input costs and selling prices, with the latter increasing at the second fastest pace since 2008.

The fall in the PMI survey's headline index in March contrasts with official forecasts for industrial production growth, published last week. Industrial production increased by 4.1 percent on the month in February and officials expect this will be followed by an increase of 0.9 percent on the month in March before a stronger increase of 5.2 percent in April.

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.