Why Japan’s Services PMI Fell in July

The Japan Services PMI in July

According to the latest report by Markit Economics, the Japan Services PMI (purchasing managers’ index) (EWJ) (DXJ) stood at 52.0 in July 2017, compared with 53.3 in June 2017, missing the market expectation of 53.3.

Why Japan’s Services PMI Fell in July

July marks the tenth-straight month of expansion in Japan’s service activity. Remember, levels above 50.0 indicate an expansion in activity, while levels below 50.0 indicate contraction. Notably, Japan’s Services PMI in July was its lowest reading since February 2017.

Japan’s July PMI indicates that production output, new order growth and export orders all rose at a weaker pace for the month. Employment growth also rose at a weaker pace in July. The overall domestic demand and overseas (VT) (ACWI) (VTI) demand in the service sector fell.

Performance of ETFs

The iShares MSCI Japan ETF (EWJ), which tracks the performance of Japan, rose nearly 0.8% in July 2017. The WisdomTree Japan Hedged Equity ETF (DXJ) rose nearly 0.57% in July 2017.

Japan’s economy has shown strong recovery in recent months, and improving consumer confidence in Japan has been strengthening investor sentiment. The rising consumer demand is expected to boost the earnings of Japanese businesses, though in July, the stronger Japanese yen (FXY) hampered the overall performance of the economy. Export orders fell due to the stronger yen, affecting the services PMI in turn.

In the next part, we’ll analyze US inflation in July 2017.