February Industrial Production

Unexpected slide in Feb vs. turnaround of underlining trend

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  • Masahiko Hashimoto

Summary

◆In the Preliminary Report (Ministry of Economy, Trade and Industry [METI]), industrial production was unexpectedly weak in February, posting the first slide in three months (down 0.1% m/m) and undershooting the market consensus (up 2.5%). However, production increased for the third consecutive month on a three-month moving average basis, while the current METI survey projects overall production to increase moderately going forward, meaning that the underlying uptrend continues.


◆Looking at February production by industry, the electronic component/device industry saw a slide (down 5.0% m/m), despite an upbeat projection in the previous METI report released in February, dragging down overall production. Meanwhile, production increased m/m for ten industries out of 16 for which data is available on a preliminary estimate basis, meaning a broad range of industries saw improvements. In comparison with projections in the previous METI report, gains in material industries were almost on par with such projections, while advances were limited for assembly industries (transportation equipment, info/communications equipment, and electrical machinery). Thus, the overall figure undershot market expectations.


◆The current METI survey projects overall production to increase 1.0% m/m in March and to advance 0.6% in April, meaning industries expect the underlying uptrend to continue. Industries projecting advances for both months are iron/steel, general machinery, and electronic components/devices. Those projecting slides for both months are nonferrous metals and info/communications equipment—specifically, the latter projects a substantial reduction (down 19.1%) for April. Projections by other industries are seesawing. Thus, industry projections are shifting to a mixed tone from the upbeat note seen for a few months.

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