October Industrial Production

◆Industrial production increased for the first time in four months in October (up 1.8% m/m), substantially outpacing the market consensus (down 2.0%). The ratio of actual production to the projection saw the first positive figure since August 2010. Contrary to expectations, the October result was favorable. Meanwhile, inventories increased for the first time in three months (up 0.3%) but the inventory ratio declined for the first time in two months (down 1.8%).

◆The METI survey projects overall production to decline 0.1% m/m in November but to advance 7.5% in December. After pushing up industrial production in October, the electronic components/devices industry is projected to see a surge in production in both November and December. Info/communications equipment and transportation equipment are both projected to see a double-digit gain in December. Materials industries are also projected to see surges across the board for December. All in all, production projections for December are generally bullish.

◆We expect industrial production to gradually break out of the doldrums, supported in part by the transportation equipment industry--the industry had placed downward pressure on overall production after an end to eco-car subsidies, but its production has begun to show signs of bottoming. Meanwhile, export volume, which moves in tandem with production, has continued on a persistent downtrend. Thus, we do not expect industrial production to see the sharp recovery projected in the METI survey. However, we do see production firming up in line with a recovery of overseas economies early in 2013.