October Industrial Production

Undershot expectations but remained on underlying uptrend

RSS

November 29, 2013

  • Masahiko Hashimoto

Summary

◆In Indices of Industrial Production (preliminary; Ministry of Economy, Trade, and Industry [METI]), October industrial production saw the second m/m gain in a row (up 0.5%). Although undershooting the consensus expectation (up 2.0%), we maintain our view that production remains on an underlying uptrend. Indeed, METI’s forecast survey projects production to increase going forward. Thus, being short of expectations alone does not warrant excessively pessimistic views.


◆Production was mixed by industry, up m/m in nine, down in six. Among those that saw advances and pushed up overall production were general-purpose/production/business-oriented machinery, electrical machinery, and plastic products.


◆METI’s production forecast survey projects gains in overall production in November (up 0.9% m/m) and December (up 2.1%). As for November, gains are posted by general-purpose/ production/business-oriented machinery (industry that has persistently posted projections of substantial gains), as well as by iron/steel and chemicals. As for December, gains are projected across the board, regardless of materials or assembling. Thus, the underlying uptrend is projected to continue in general.


◆Going forward, we expect production to maintain the uptrend. Considering a likely acceleration in personal consumption centering on durable goods toward end-FY13 prior to the consumption tax hike scheduled for April 2014, and also taking into account public works projects likely maintaining the current high level, domestic demand will lift overall production. Meanwhile, export volume, which tends to move in tandem with industrial production, has slackened, centering on shipments to Asian trading partners. However, reflecting the weak yen and economic growth in the US, export volume is likely to return to an uptrend, driving production.

Daiwa Institute of Research Ltd. reserves all copyrights of this content.
Copyright permission of Daiwa Institute of Research Ltd. is required in case of any reprint, translation, adaptation or abridgment under the copyright law. It is illegal to reprint, translate, adapt, or abridge this material without the permission of Daiwa Institute of Research Ltd., and to quote this material represents a failure to abide by this act. Legal action may be taken for any copyright infringements. The organization name and title of the author described above are as of today.