Macro Monday 43 - Japan Composite PMI
Macro Monday 43
Japan Composite PMI – Japan’s Business Activity
(Flash PMI is released Tuesday 23rd April 2024)
Unfortunately, I had great difficulty in locating the Japan Composite Flash PMI in chart form on TradingView (it appears to not be available).
Instead we will briefly cover the Japan Composite PMI chart which is the final PMI released later on Tuesday 7th May 2024 (for April). We can review the Flash PMI figures that are released tomorrow regardless for an indication. The flash consists of about 90% of the final PMI input thus is a good forward view on how the final PMI will come in on the 7th May 2024.
Over the past three weeks we have covered the following three indicators for Japan:
1.Macro Monday 41 - Japan Consumer Confidence Index (CCI)
🚨 Pessimistic but with an improving long term trend. A positive ranging move from 28.6 in Nov 2022 to 39.5 in April 2024. This is the highest reading in c. 5 years, a significant milestone and trend higher. A move above 40.86 would signify a move above the historical average level of consumer sentiment (less pessimistic, as only above 50 it optimistic).
2. Macro Monday 42 - Japan Reuters Tankan Index (RTI)
✅ Business Optimism is high with the Japan Reuters Tankan Index standing at +9, down from the previous month's 10 however firmly in the positive (above zero).
3. Macro Monday 43 - Japan Composite PMI
✅ THIS WEEK we take a quick look at the Japan Composite PMI which is firmly in the positive at 51.7 (above 50 is expansionary and below 50 is contractionary).
As you can see from the chart below we have been in an uptrend since Nov 2023
The Japan Composite PMI for March 2024 was 51.7, indicating continued expansion in private sector activity (businesses). This matches the optimistic business sentiment in the Japan Reuters Tankan Index. This marked the third consecutive month of growth and the strongest pace since late September in PMI. The service sector saw solid expansion, while the decline in manufacturing production softened slightly. New orders accelerated to a seven-month peak, primarily led by the service economy. Employment growth was the steepest since May 2023, and there was a marginal rise in outstanding business. Input prices expanded robustly, leading businesses to increase their selling prices at the most pronounced rate for seven months. Overall, the PMI provides insight into the health of Japan’s private sector economy
The overview of the past three weeks we covered and what they broadly tell us? 👇🏻
Japan Businesses are in expansion and optimistic whilst the Japanese Consumer remains reserved
In contrast to the positive Business Sentiment and Business Activity in Japan, the Japanese consumer is not as optimistic and appears to be trailing business behind sentiment(RTI) and activity (PMI). The Japan Consumer Confidence Index (CCI) came in at 39.5 for March. Whilst this was the highest reading in 5 years for the Japan CCI and demonstrated a trending recovery from lows of 28.6 in Nov 2022, the Japan CCI remains below its historical average level of 40.86. Despite a sizable recovery since Nov 2022, the current 39.5 suggests the Japanese Consumer is still more pessimistic than the historical average.
Whats the Japan PMI made up of?
The Japan Composite PMI is a weighted average of several key components that provide insight into the health of the private sector economy.
Here are the main components:
New Orders (30%): Measures the volume of new orders received by businesses. An increase in new orders suggests growing demand and potential future production.
Output (25%): Reflects the level of production or business activity. Higher output indicates expansion, while lower output signals contraction.
Employment (20%): Tracks changes in employment levels. A rising employment index indicates job creation and economic growth.
Suppliers’ Delivery Times (15%): Monitors the time it takes for suppliers to deliver goods or services. Longer delivery times may indicate supply chain disruptions.
Stocks of Purchases (10%): Measures inventory levels. An increase in stocks suggests businesses are building up inventories, while a decrease may indicate reduced demand.
The above components collectively provide a comprehensive view of economic conditions in Japan’s private sector
How to read the PMI chart
The Composite PMI varies between 0 and 100, with a reading above 50 indicating overall growth compared to the previous month, and below 50 indicating contraction.
PUKA
Japan Composite PMI – Japan’s Business Activity
(Flash PMI is released Tuesday 23rd April 2024)
Unfortunately, I had great difficulty in locating the Japan Composite Flash PMI in chart form on TradingView (it appears to not be available).
Instead we will briefly cover the Japan Composite PMI chart which is the final PMI released later on Tuesday 7th May 2024 (for April). We can review the Flash PMI figures that are released tomorrow regardless for an indication. The flash consists of about 90% of the final PMI input thus is a good forward view on how the final PMI will come in on the 7th May 2024.
Over the past three weeks we have covered the following three indicators for Japan:
1.Macro Monday 41 - Japan Consumer Confidence Index (CCI)
🚨 Pessimistic but with an improving long term trend. A positive ranging move from 28.6 in Nov 2022 to 39.5 in April 2024. This is the highest reading in c. 5 years, a significant milestone and trend higher. A move above 40.86 would signify a move above the historical average level of consumer sentiment (less pessimistic, as only above 50 it optimistic).
2. Macro Monday 42 - Japan Reuters Tankan Index (RTI)
✅ Business Optimism is high with the Japan Reuters Tankan Index standing at +9, down from the previous month's 10 however firmly in the positive (above zero).
3. Macro Monday 43 - Japan Composite PMI
✅ THIS WEEK we take a quick look at the Japan Composite PMI which is firmly in the positive at 51.7 (above 50 is expansionary and below 50 is contractionary).
As you can see from the chart below we have been in an uptrend since Nov 2023
The Japan Composite PMI for March 2024 was 51.7, indicating continued expansion in private sector activity (businesses). This matches the optimistic business sentiment in the Japan Reuters Tankan Index. This marked the third consecutive month of growth and the strongest pace since late September in PMI. The service sector saw solid expansion, while the decline in manufacturing production softened slightly. New orders accelerated to a seven-month peak, primarily led by the service economy. Employment growth was the steepest since May 2023, and there was a marginal rise in outstanding business. Input prices expanded robustly, leading businesses to increase their selling prices at the most pronounced rate for seven months. Overall, the PMI provides insight into the health of Japan’s private sector economy
The overview of the past three weeks we covered and what they broadly tell us? 👇🏻
Japan Businesses are in expansion and optimistic whilst the Japanese Consumer remains reserved
In contrast to the positive Business Sentiment and Business Activity in Japan, the Japanese consumer is not as optimistic and appears to be trailing business behind sentiment(RTI) and activity (PMI). The Japan Consumer Confidence Index (CCI) came in at 39.5 for March. Whilst this was the highest reading in 5 years for the Japan CCI and demonstrated a trending recovery from lows of 28.6 in Nov 2022, the Japan CCI remains below its historical average level of 40.86. Despite a sizable recovery since Nov 2022, the current 39.5 suggests the Japanese Consumer is still more pessimistic than the historical average.
Whats the Japan PMI made up of?
The Japan Composite PMI is a weighted average of several key components that provide insight into the health of the private sector economy.
Here are the main components:
New Orders (30%): Measures the volume of new orders received by businesses. An increase in new orders suggests growing demand and potential future production.
Output (25%): Reflects the level of production or business activity. Higher output indicates expansion, while lower output signals contraction.
Employment (20%): Tracks changes in employment levels. A rising employment index indicates job creation and economic growth.
Suppliers’ Delivery Times (15%): Monitors the time it takes for suppliers to deliver goods or services. Longer delivery times may indicate supply chain disruptions.
Stocks of Purchases (10%): Measures inventory levels. An increase in stocks suggests businesses are building up inventories, while a decrease may indicate reduced demand.
The above components collectively provide a comprehensive view of economic conditions in Japan’s private sector
How to read the PMI chart
The Composite PMI varies between 0 and 100, with a reading above 50 indicating overall growth compared to the previous month, and below 50 indicating contraction.
PUKA
Rep: 52.6 ✅ Higher than Expected ✅
Exp: 52.0
Prev: 51.7
The early release of the Japan Composite PMI known as the "FLASH" PMI came in higher than expected at 52.6.
The Final PMI will be released on the Tuesday 7th May 2024 which will be reflected in the below chart.