September 28, 2012
Summary
◆Production persistently weak: August industrial production declined 1.3% m/m, the second consecutive monthly slide, and short of the market consensus (down 0.5%). Production declined for the fifth consecutive month on a three-month moving average basis, showing underlying weakness. The METI survey projects overall production to decline 2.9% in September and remain flat (0.0%) in October. If the September figure turns out as expected, production would decline 3.6% q/q in Jul-Sep, leading to the second consecutive quarterly slide.
◆Downward pressure from electronic components/devices, info/communications equipment: Production declined in August for 11 industries out of 16 for which data is available on a preliminary estimate basis. Major factors pulling down overall production were declines in production of the electronic components/devices and info/communications equipment industries. The former declined 5.2% m/m for the second consecutive month, although an advance of 6.1% had been projected in the METI survey released last month, resulting in a greater-than-expected decline in overall production.
◆Full-fledged recovery unlikely before 2013: We expect industrial production to remain weak for the time being as (1) production of the transportation equipment industry is likely to remain at a low level in reaction to a boost from eco-car subsidies, which had driven overall production, and (2) shipments for export will likely continue to stagnate amid the slowdown in overseas economies. Production would firm up if exports gain momentum accompanying a recovery in overseas economies, but the EU economy, which has dragged down Japan’s exports, is unlikely to see a proper recovery before 2013. Thus, production is unlikely to see a full-fledged turnaround before 2013.
◆Downward pressure from electronic components/devices, info/communications equipment: Production declined in August for 11 industries out of 16 for which data is available on a preliminary estimate basis. Major factors pulling down overall production were declines in production of the electronic components/devices and info/communications equipment industries. The former declined 5.2% m/m for the second consecutive month, although an advance of 6.1% had been projected in the METI survey released last month, resulting in a greater-than-expected decline in overall production.
◆Full-fledged recovery unlikely before 2013: We expect industrial production to remain weak for the time being as (1) production of the transportation equipment industry is likely to remain at a low level in reaction to a boost from eco-car subsidies, which had driven overall production, and (2) shipments for export will likely continue to stagnate amid the slowdown in overseas economies. Production would firm up if exports gain momentum accompanying a recovery in overseas economies, but the EU economy, which has dragged down Japan’s exports, is unlikely to see a proper recovery before 2013. Thus, production is unlikely to see a full-fledged turnaround before 2013.
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