Japan just offered some promising news on how the global manufacturing sector is performing

Photo by Keith Tsuji/Getty Images

We’ve just received the first indication on how the global manufacturing sector performed in April, and it’s promising news.

Activity levels in Japan’s mammoth manufacturing industry have improved again.

The flash manufacturing Purchasing Managers Index (PMI) released by Nikkei-IHS Markit rose 0.4 points to 52.8, indicating that conditions not only improved from March, but at a faster pace.

Source: IHS Markit

The PMI measures changes in activity levels across Japan’s manufacturing sector from one month to the next, and ranges from a score of 0 to 100.

A reading of 50 indicates that activity levels were unchanged from a month earlier. Anything above this level indicates that activity levels improved, while anything below suggests they deteriorated. The distance away from 50 indicates how quickly activity levels improved or deteriorated.

The flash estimate is based off responses from around 85-90% of firms surveyed, and is a fairly good guide as to what the final reading will be when it’s released in one weeks time.

As the table below from IHS Markit reveals, the survey’s internal components all point to strengthening conditions.

Source: IHS Markit

Output, new export orders, employment, work backlogs, purchase quantities and output and input prices all increased at a faster pace than a month earlier, while new orders also grew but at a slower pace.

The increase in both domestic and international orders suggests that demand is improving, suggesting that activity levels are likely to remain firm in the months ahead.

That probably reflects the boost in expectations among manufacturers which improved at a faster rate than a month earlier.

“Driven by firmer external demand, the sector was underpinned by a stronger export performance in April, with new export orders rising at a rate amongst the best seen in the past three years,” said Paul Smith, senior economist at IHS Markit.

“Companies are also adding to their workforces at a rate that matched January’s 34-month peak, but price pressures continue to mount with input costs and output charges rising at stronger rates.”

After the release of the Japanese PMI, market attention will now turn to the release of flash estimates for the US, Eurozone, Germany and France that will be released later in the session.

A performance akin to that seen in Japan will help to bolster confidence in the global economic recovery which has wavered in recent weeks.

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