JP: PMI Composite

Tue May 01 19:30:00 CDT 2018

Actual Previous
Composite - Level 53.1 51.3
Services - Level 52.5 50.9

The Nikkei Composite Index for Japan increased to 53.1 in April from 51.3 in March from 52.2 in February, with conditions improving in both the manufacturing and services sectors. The Business Activity Index for Japan's services sector, also published today, increased from 50.9 in March, its lowest level since late 2016, to 52.5 in April, while the manufacturing PMI survey, released earlier in the week, showed an increase in its headline index from 53.1 to 53.8 in April.

The increase in the headline index for the services PMI in April reflected stronger growth in both new orders and employment in the sector. The manufacturing survey also showed stronger growth in output, new orders, and employment in April. Business confidence about the twelve month outlook remains relatively strong but moderated in the services sector, while manufacturing survey respondents reported greater optimism.

Both surveys showed a moderation in input costs growth in April. Manufacturers also reported weaker growth in selling prices, but the service sector survey indicates that firms in that sector were able to increase selling prices at a faster rate.

Together the manufacturing and service sector PMI surveys for Japan show solid business conditions at the start of the new quarter, with stronger domestic demand outweighing the impact of recent currency appreciation on exports. Weaker growth in input costs and manufacturing selling prices, however, suggest that overall price pressures remain subdued.

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.