JP: PMI Manufacturing Index

Thu May 31 19:30:00 CDT 2018

Actual Previous
Manufacturing - Level 52.8 53.8

The Nikkei Manufacturing PMI headline index fell to 52.8 in May, above the flash estimate of 52.5 but confirming a decline from 53.8 in April. This index has now fallen in three of the last four months and is now at a nine-month low, well down from the record level reached at the start of the year.

The decline in the headline index reflects weaker reported growth in both output and new orders in May, with respondents also reporting employment increased at the slowest pace in seven months. The survey's measure of new export orders, however, indicates external demand strengthened in May after moderating in April and respondents remain confident about the outlook, with the survey's measure of business sentiment increasing to a four-month high. The survey indicates price pressures remained strong in May, with its measure of input costs growth matching a 41-month high and respondents reporting selling prices were hiked for a seventeenth consecutive month, the longest streak in the survey's history.

The decline in the PMI survey's headline index in May contrasts with official forecasts for industrial production growth to remain positive. Industrial production increased by 0.3 percent on the month in April and officials expect this will be followed by an increase of 0.3 percent on the month in May before falling 0.8 percent in June.

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.