April Industrial Production

Production slows momentarily, but is expected to retain strong undertone

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  • Shotaro Kugo

Summary

◆April 2014 indices of industrial production declined for the first time in 2 months, down -2.5% m/m, and fell below market consensus as well by -2.0% m/m. The decline in production, coming after the increase in consumption tax, was as expected, and so was not a big surprise. The shipment index was down for the third consecutive month at -5.0% m/m, while the inventory index fell for the first time in two months at -0.5%. The index of inventory rate therefore fell for the first time in 3 months at -1.8% m/m.


◆As for production by industry in April, twelve out of the total of fifteen industries recorded m/m declines, with the slowdown touching a broad range of industries. Industries which recorded declines included transport machinery (down 3.5% m/m), electronic components/devices (-5.2%), and chemicals (excluding pharmaceuticals) down 3.3% m/m. Setbacks suffered by these industries contributed to the overall decline.


◆METI’s production forecast survey sees further ups and downs for the near future, with May production plans up by 1.7% m/m, while June is expected to be down by 2.0%. April experienced a slowdown in production which was an effect of the reaction decline occurring immediately after the increase in the consumption tax. Production is expected to remain mostly flat in the near future, but it appears that it has avoided the extremes of the reactionary decline which followed the consumption tax hike.

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