Japan February flash manufacturing PMI shows expansion at three-year high

TOKYO (Reuters) - Japanese manufacturing activity expanded in February at the fastest pace in almost three years, a preliminary survey showed on Tuesday, a sign that domestic and overseas demand is improving.

The Markit/Nikkei Flash Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 53.5 in February from a final 52.7 in January.

The index remained above the 50 threshold for the sixth consecutive month and marked the fastest expansion since March 2014. A reading about 50 indicates expansion in the sector while a reading below 50 indicates contraction

“Japan’s manufacturing engine shifted into a higher gear during February, as faster increases in output, new business and employment were reported,” said Samuel Agass, economist at IHS Markit, which compiles the survey.

“Encouragingly...the added pressures on capacity should ensure growth will be maintained at a solid pace during at least the first half of this year.”

The index for new orders, which measures both domestic and external demand, rose to a preliminary 54.7 from a final 54.0 in January, which also shows the fastest growth since March 2014.

The flash index for new export orders rose to 54.2 from 53.1 in the previous month to indicate the fastest growth since December 2013.

The output component of the PMI index rose to a preliminary 54.3, showing the fastest expansion since February 2014.

The latest PMI survey suggests that exports and domestic demand have started strongly this year, an indication growing support for protectionist trade policies in some countries has so far had no negative impact on economic activity.