Good news from Japan, but will it last

Manufacturing gains ground

The government in Japan reported that preliminary data showed that industrial production rose 1.4% in July, the fifth-straight monthly increase, while the Nomura/JMMA Manufacturing PMI increased from 50.4 in July in 53.6 in August, the best in over two years and the second-consecutive reading above 50 . A reading of 50 suggests the sector is neither expanding nor contracting.

Production remains sharply lower versus one year ago, but the level on the PMI indicates that manufacturing is expected to continue to expand as companies replenish depleted stockpiles.

However, when inventories rise to more normal levels, the expansion in Japan may flounder unless demand in China remains strong and the US consumer exits hibernation.