Japan has just provided another signal that the global economy is doing OK

JIJI PRESS / AFP / Getty Images

Activity levels across Japan’s manufacturing sector improved in August, according to data released by IHS Markit today.

The group’s flash manufacturing Purchasing Managers Index (PMI) rose 0.7 points to 52.8, leaving it at a three-month high.

The PMI measures changes in activity levels across Japan’s manufacturing sector from one month to the next. Anything above 50 signals that activity levels are improving while a reading below suggests that they’re deteriorating. The distance away from 50 indicates how quickly activity levels are expanding or contracting.

The flash reading, released one week before the final PMI report, is based off around 85-90% of survey responses, and is generally a pretty accurate guide as to how the final figure will print.

So at 52.8, the flash result indicates that activity levels not only improved in August, but at a faster pace.

Mirroring the bounce in the headline PMI, most of the survey’s activity subindices also improved from July.

Source: IHS Markit

Encouragingly, both the new orders and new export orders subindices — lead indicators on future activity levels — both grew at a faster pace than July. That’s another sign that both domestic and international demand remains firm, continuing the trend seen in other economic indicators.

Output, staffing levels, order backlogs and inventories of raw materials also grew, a result that indicates the improvement in August was broad-based.

“August’s PMI survey provided another positive set of data on the health of Japan’s manufacturing sector, with growth rates of output, new orders and employment all improving,” said Paul Smith, director at IHS Markit, following the release of the report.

“Expansion continues to be supported by a mix of strengthened demand from both domestic and external sources: public work projects and stronger sales to South East Asia were both reported by panellists as areas of growth in August.”

Following the release of Japan’s flash manufacturing PMI, attention will now turn to the release of manufacturing and services PMIs from Europe and the United States later in the session.

While all remain firmly in positive territory, recent survey’s have pointed to a loss of momentum compared to the levels seen earlier in the year.

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