March Industrial Production

Underlying uptrend continues

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  • Masahiko Hashimoto

Summary

◆In the Preliminary Report (Indices of Industrial Production, Ministry of Economy, Trade and Industry [METI]), industrial production posted the fourth consecutive m/m gain in March (up 0.2% m/m), although slightly undershooting the market consensus (up 0.4%). Production increased for the fourth consecutive month on a three-month moving average basis, indicating that the underlying recovery continues. Shipments saw their second gain in a row (up 0.3%), while inventories declined (down 0.2%), leading to the sixth consecutive month of decline (improvement) in the inventory-shipment ratio (down 1.2%).


◆Looking at March production by industry, chemicals increased (up 5.3% m/m) more than projected in the previous METI report released in March, driving overall production. Other industries pushing up production included electronic components/devices and info/communications equipment. In the case of the former, production turned to increase (up 4.7%) from stagnation, reflecting higher production of smartphone components. In the case of the latter, contrary to a projection of a major slide in the previous METI report, production increased (up 7.9%). In contrast, the slide in the transportation equipment industry was a major factor pulling down overall production, but which was anticipated in the previous METI report.


◆The current METI survey projects overall production to increase 0.8% m/m in April and to decline 0.3% in May, meaning industries expect the underlying moderate uptrend to continue, although seesawing on a monthly basis. Whether production sees a stable recovery will depend on export volume trend. Following current signs of bottoming out, export volume is likely to increase going forward as the environment for exports has begun to turn around amid a recovery in overseas economies and an improvement in price competitiveness triggered by a weaker yen. Driven by advances in exports, production should continue to increase moderately.

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